Earlier this week at the Meet the Money conference, I had an interesting conversation with someone who was parachuting into the conference from outside the industry, which boiled down to a simple idea: Everyone is trying to make out the current situation the hotel industry faces as something more complicated than it is.
Everyone wants to know when the transaction environment will open up. Everyone wants to know when demand trends will turn a bit more positive.
Those things will happen when economic policy allows for it.
We all want to know — or at least feel like we know — a little bit more than everyone else in the room, but it's really that simple. It's all about inflation and interest rates right now.
Everyone is waiting for interest rates to come down so deals can pick up and banks can lend. That will happen when inflation moderates a bit more than it has.
Interest rates are also a pretty direct indicator of how investors are feeling right now. If you were one of the seemingly overwhelming majority that expected early rate cuts, you're feeling disappointed by the current state of things. If you expected things to stay status quo, well, you're getting exactly what you bargained for. If you are an extreme pessimist who expected another wave of increases, you're probably still an extreme pessimist, but you at least have an argument for feeling a little cheerier than everyone else.
Maybe this is all a bit reductionist for the broader economy and the nuances of the hotel industry, but I also don't think it's wrong. It's the simplest flow chart of all time: Inflation — interest rates — access to cheap capital.
Eventually, things will normalize one way or another. No one will be satisfied where things land because either rates will still be higher than they want them or because they're really low and that means the economy is in the tank.
Let me know what you think on Twitter, LinkedIn or via email.
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