Many hoteliers hoped for — and got some degree of — normalization in 2023, but the year was still defined by a difficult deals environment and shifting demand patterns.
At the end of the year, Hotel News Now took a holistic look back at 2023 and the issues that defined it. Here are some of the highlights of that coverage.
Difficult Deals
In the face of a banking crisis, spurring increased costs and lower availability of financing, some hoteliers have been hoping for distress to spur discount pricing.
Instead, a bid-ask gap persisted.
Kevin Davis, Americas CEO for JLL Hotels & Hospitality, said higher costs of debt made things too difficult for many investors.
“That’s what’s driven down what buyers are willing to pay for assets, and in many cases, it is below where sellers are willing to sell, hence a fairly sizable bid-ask gap and also the significant reduction in transaction volume,” he said.
And distress came only in unique pockets.
Hotel REITs Park Hotels & Resorts and Ashford Hospitality Trust led the way in handing back keys to lenders, with both saying specific circumstances led them to that decision.
"We have a handful of assets we've identified internally as our potential for-sale assets that are maybe not long-term core assets, and we are working with a variety of brokers to figure out what is the best timing," Hays said on an earnings call. "Some of those are in the market right now and some maybe have size or scale where we think it's hard to achieve a certain sales price. If there's value in it, we are out in the market right now. We have a lot of irons in the fire."
Some deals did get done, though, headlined by KSL Capital Partners' $1.4 billion acquisition of Hersha Hospitality Trust, which closed in November.
A Demand Reset
The recovery from the depths of the COVID-19 pandemic was led by outsize leisure travel demand, but hoteliers now say demand is getting closer to pre-pandemic norms as leisure softens and group significantly rebounds.
That is likely to continue heading into the new year.
"I think that 2024 could be the most normal year of what we've had in a while," Remington Hospitality President Chris Green said. "Business transient is going to be back. Group is going to be really good. It's going to be a solid year. We're just back to what hotel operations is."
The shift in demand has been coupled with a shift in revenue management strategy, as well.
Seonju Lawrence, vice president of revenue strategy at Mission Hill Hospitality, said her company has reacted to the resurgence of group.
"With a strong group base, we shifted our strategy to focus more on maximizing ADR opportunity. The convention group base allowed this [downtown Atlanta] hotel to limit the discounted segmentation and selectively take higher-rated businesses such as retail. As a result, the hotel is expected to grow ADR by 10% and occupancy by almost 4% [in 2023], which is strong performance," she said.
Shifting Global Trends
Across the globe, hoteliers are expecting some changes in travel trends, as many countries push for "de-globalization" and China seeks to re-enter the foray with both inbound and outbound travel.
"India’s middle class is increasing, by 200% in the past 20 years. China is the world’s biggest opportunity, the biggest long-haul market over the next 10 years, with 60 million households entering the demand pool,” said David Goodger, managing director for Europe, Middle East and Africa at Tourism Economics.
In terms of transactions, Europe saw an increase in 2023, albeit not a huge one, with single-asset deals dominating the year.
A Boom in Events
Some describe 2023 as the year of Taylor Swift for the hotel industry, but she could also be viewed as just one example of concert and events driving hotel demand.
Still, Swift was on a level of her own when it came to getting guests in hotels.
“The Taylor Swift impact was unlike the rest,” said Cory Chambers, chief commercial officer of Hospitality Ventures Management Group. “That extraordinary event and tour created the question and the interest in these types of events. Special events always create demand uplift, but that one was extraordinary in a way that we don’t typically see.”
Click here for more of Hotel News Now's coverage of the end of 2023 and the start of 2024.