When the news came across Thursday that U.S. inflation had jumped 2.9% year over year in August, that was obviously bad news in its own right.
Consumers' spending ability seems to be increasingly restricted, which only reinforces the general sense of concern that seems to loom over the U.S. hotel industry about the trajectory of travel demand. Every dollar everyday people have to spend on groceries is, after all, a dollar they can't spend on a hotel stay or airfare.
But this news hits as a bit of a double whammy for hotel investors because of what you could probably deem as inopportune timing as the U.S. Federal Reserve is slated to meet next week and decide what happens with interest rates.
Now, interest rate decisions are regarded as more political than really any other point in modern history, and next week is unlikely to be an exception to that. So there will certainly still be pressure to announce the rate cut many Fed watchers were expecting to see.
But a cut to interest rates that was seen as a virtual certainty is now anything but given inflation is moving farther away from — not closer to — the Fed's 2% target.
So ultimately what does this mean for hoteliers — other than me taking this time to talk about how dreary things look at the moment?
Well, in my mind, I think this is a good moment to take stock of just how good or bad things are at the moment and not hope for some magic, macroeconomic bullet that is going to fix the broad trajectory of the hospitality industry.
I've written previously about the hotel industry's habit of predicting that six months from now things are going to be significantly better. At this specific moment, I struggle to think of what exactly is going to make six months from now markedly different than it is right now, but my crystal ball isn't any less hazy than anyone else's.
At the same time, I think back to the immediate aftermath of the downturn during the COVID-19 pandemic. I heard from hotelier after hotelier that the next time there's a downturn they won't feel so bad about it because there's no way it'd be as bad as it was in 2020 when demand basically zeroed out.
We'll see if that's the case eventually — not that I'm calling for a significant downturn or a recession — but we'll get a chance to really see if hoteliers can avoid panic mode while things seem to be stuck in neutral for an indefinite period.
Let me know what you think on LinkedIn or via email.
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