Confidence in the strength and stability of the hotel industry is a matter of who you ask and when.
A survey of hotel operators found that their overall confidence is stronger for the long term — the next two years — than it is for the next three months.
The survey, conducted by CoStar hospitality analytics firm STR in November 2022, asked operators to rate their confidence on a scale of 1-10 for the short, medium and long term. Confidence for the next three months averaged a rating of 7 on the scale. For the medium term — the next year — confidence averaged a 7.4; and for the long term, it improved again to 7.7.
"Hoteliers are more positive when looking further out," said Jan Freitag, national director of hospitality analytics at CoStar, in his monthly video analysis of U.S. hotel performance.
Lenders also seem to have a cloudier short-term view of the hospitality sector.
As part of his video, Freitag was joined by Warren de Haan, co-CEO of private debt lender ACORE Capital, who shared insights into the different lenses that lenders are looking through.
"One is, in the aggregate, the macro, we’ve seen some great performance in the hospitality industry, particularly assets that have demonstrated inelastic demand characteristics, and we’ve seen healthy growth both in the top line and the bottom line," he said.
However, for now, banks are being more conservative — in large part because of regulation, over-allocation to commercial mortgages and interest rate instability, he said.
De Haan added that in the debt markets, more stability from the Federal Reserve on interest rates will lead to "greater velocity of bond buyers [coming] back into the markets," creating more liquidity and thereby helping to "dislodge some of the backlog of loans sitting on the banks’ balance sheets."
The other factors that the lending firm is basing decisions on include "the health of corporate earnings and the behaviors of CEOs and ... the health of the consumer," De Haan said.
"Those are the two categories. One is a period of reduced liquidity and higher selectivity by lenders. And secondly is: How do we as lenders underwrite a potentially inevitable reduction in demand?" he added.
In the video, Freitag said that "as a lender, [De Haan] has to be conservative and ... always has to protect the downside ... and it's through this lens that he has this ... realism as we enter into 2023."
For more of Freitag's thoughts on U.S. hotel performance in January, the recovery of hotel demand from group and business travelers, and a look at a high-end resort sale in Florida, watch the video above.