Are you an optimist or a pessimist?
My guess is many of you in the hotel industry are optimists. When I saw the first stories coming in from the Americas Lodging Investment Summit in January, I had to re-read the headlines because they were so obviously dripping with optimism in a way that made me doubt the stories could deliver.
But yes, we report what you say, and at ALIS this year, you said unbridled optimism abounded not only around performance, but also hotel transaction pace and volume.
This week we're at the Hunter Hotel Investment Conference and that unbridled optimism is I think at a more realistic pitch.
Here's the takeaway:
- Yes, hotel owners and developers are worried about the path these banking failures might take. Will confidence erosion lead to more failures? Will banks tighten down, making it tougher to put a loan together for a deal, or to resolve CMBS issues or to carry out a property improvement plan?
- Yes, likely the U.S. will see a mild recession in the second half of 2023, but it'll be mild because even with more layoffs, unemployment rates will remain low and even with a little less consumer spending, people still have good savings for the most part.
- Travel demand across the spectrum is still high! And the silver lining there is that even if some demand drops off as people worry about recession and cutbacks, those losses have the potential to be offset and then some by inbound international travel.
Coming into the conference this week, I felt, pessimistically, that the bank failures could set off a domino effect. So far that hasn't happened but we'll see.
The hotel industry here in the U.S. has matured a good deal since the Great Recession, financing sources for hotel projects are more varied, and the stakeholders more savvy about risk and exposure in general. But this will make borrowing tougher for the people in the industry who rely on small and midsize banks (which is a lot).
Again, we'll see. Supply already was poised to constrain over the next few years, which isn't a bad thing for the industry overall, though not something brand executives concerned with unit growth like to hear.
Long story short, the cycle continues to cycle.
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