If I had to characterize the collective attendee mood at the 2025 Americas Lodging Investment Summit in Los Angeles with an emoji, I think the “shrug” emoji sums up this year’s conference well.
After 2.5 days of meeting, greeting, listening, probing and learning, the attendee sentiment, normally characterized by “perma-bulls” and “glass half-full” optimists, was more subdued than at prior conferences. Last year, everyone expected the U.S. Federal Reserve would cut interest rates six times and a deal bonanza by the time the NYU International Hospitality Industry Investment Conference came around in June. That did not happen. This year, the call on the investment banking panel was for between zero and two cuts. We will see.
The latest STR/CoStar forecast, presented by STR’s President Amanda Hite, calls for 1.8% revenue per available room growth this year, an uninspiring performance that mirrors last year’s results. This growth is expected almost completely from rate growth, but the average daily rate increase of 1.6% is, once again, below the expected inflation rate. This is expected to put pressure on margins.
While I had plenty of conversations about the top-line revenue growth and potential upside scenarios, the more interesting and important exchanges were about the expense side. Many investors had declared that the election would provide much-needed clarity, driving sentiment. Between Election Day and Inauguration Day, that seemed to be true.
But less than two weeks into the new administration’s tenure, the avalanche of executive orders — followed by lawsuits and reversals — has provided less clarity than expected. This dust will settle, of course, and it is too early to see the impact on the U.S. hotel industry clearly.
But the conversations about the potential ramifications of new rules, especially around immigration, were ubiquitous. I strongly applaud that, to a man, the hotel CEO panelists reaffirmed their stance to support their ongoing initiatives that foster diversity, equity and inclusion. Our industry needs to broaden — not curtail — its reach. I wish, like every year, that next year the CEO panel will represent more of the diversity we already see in our hotel staff.
Tourism Economics suggests that 15% of hotel workers were foreign-born and that the ratio is about 30% for housekeepers and 24% for cooks. That is not a statement about illegal immigration but much more about the need for our industry, as Craig Smith from Aimbridge said, “to push for legal immigration.” Chris Nassetta, CEO of Hilton, even went so far as to call this period a “once-in-a-generation opportunity for comprehensive immigration reform.” Sadly, the new CEO of the AHLA, Rosanna Maietta, believes it is “unlikely that true bipartisan immigration reform can happen.”
Raids and deportations could have a meaningful impact on labor availability for some industries in some regions. This, in turn, could drive up wages across the board, especially for back-of-house workers. Add to that continued upward wage pressure from new union contracts. Add to that higher insurance costs for properties in hurricane or wildfire-prone areas. Add to that higher property tax bills from cities that must find new revenue sources since their office property tax base is shrinking. Add to that the higher-for-longer interest rate environment. What you get is hotel owners feeling pressure on their bottom line and a deal environment that is uninspiring at best.
Geoff Freeman, CEO of U.S. Travel Association, summed up a potential additional knock-on effect around immigration messaging to other countries this way: “We don’t want your illegal visitors, and we are not sure we want your legal ones.”
The backdrop to this is that the Department of Commerce’s international inbound tracker shows that the number of foreign visitors is still 8% below 2019. In addition, Geoff Balloti from Wyndham feared that “visa wait times are not a focus for the administration,” potentially making it very burdensome for some foreigners to visit. With major sporting events such as the FIFA World Cup and the Olympics around the corner, this topic will remain at the top of hoteliers' minds.
That fewer regulations work in favor of the hotel industry is clear. Caroline Beteta, CEO of Visit California, said that after the visa waiver program with South Korea started, the inbound numbers increased by one-third virtually overnight. I am a bit worried that the prevailing rhetoric, coupled with the strong dollar, could easily create an environment where international travelers will look elsewhere to spend their travel budget.
Outside the main sessions at ALIS, brokers and investors met to gather sentiment, dissect deals and understand the current capital market trends. On the acquisitions and transactions outlook panel, Tony Muscio from JLL defined the prevailing cap rate environment as “a 7 to 8 cap rate for a plain vanilla, full-service hotel” and “5-cap or below for a luxury asset.” The panel agreed that deals unencumbered by brand or management contracts are more attractive since brands provide key money to increase their net unit growth. This allows for cap rate compression.
Newer brands seem to be especially eager to deploy this tool to make deals work in their favor. Couple these incentives with the large amounts of capital on the sidelines, and Meagan Brandriff from Wells Fargo wondered in an earlier panel: “When do the floodgates open?” But it seems that this question has been on analysts’ minds for more than a year, and none of my conversations have convinced me that a catalyst to spur a meaningful increase in deals is forthcoming this year. And if you are looking for a hot market, Nassetta has an idea for you. On the CEO panel, he quipped: “What’s the next Nashville? Nashville!”
Talking to other attendees working in different facets of the industry, I sensed that this year’s ALIS conference was “busy but not productive.” I am curious to see how the data and transaction volume will shape up until many of us meet again at the NYU International Hospitality Industry Investment Conference in June.
Editor’s note: Christopher J. Nassetta serves on the board of directors for Hotel News Now’s parent company, CoStar Group.
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