ATLANTA — The collapse of Silicon Valley Bank and Signature Bank, and its potential impact on the hotel industry, garnered the most attention on the first day of the Hunter Hotel Investment Conference at the Marriott Marquis Atlanta.

Although they acknowledged it’s a situation worth monitoring, hotel executives mostly downplayed short-term concerns stemming from the banks collapsing.

Lori Tirado, head of business development for Access Point Financial, a hospitality lending company based in Atlanta, said lenders remain active in the hospitality sector.

“The biggest concern from my perspective is: Will a deal pencil today where maybe interest rates are a lot wider than they were a year ago at this time? … It’s harder to know if the deal is going to make sense given where rates have gone,” she said.

"Right now, consumers are spending 66% of their consumption on services. Historically, that’s been 70%. In one sense, we're saying we expect normalization …. which means a further amount of growth in experiential services and travel, as that continues to take share back from goods," said Adam Sacks, president of Tourism Economics.

"Leisure travel continues to be strong, business travel continues to pick up, but there all these things on the periphery making elements of our business more challenging. ... such as that interest rates have gone up materially, and now with some banks in trouble, financing is harder to find."
— Justin Knight, CEO and director, Apple Hospitality REIT, on the "Wall Street Talks" panel.

"Doesn’t get much worse than having to close down all of your hotels, right?"
— Marcel Verbaas, chairman and CEO, Xenia Hotels & Resorts, on the "Wall Street Talks" panel, putting current industry challenges into perspective.

"If you look at classes of real estate, [hotels] are arguably the best class of real estate in an inflationary environment. Our lease is a daily. So as inflation lifts, you can raise your rate."
— DJ Rama, CEO, Auro Hotels, on the "Main Street Talks" panel comparing commercial real estate classes in an inflationary environment.

Yet again, hotel industry executives are staring in the face of a nightmare situation and taking an optimistic stance that the travel industry is protected from peril. There’s a great deal of uncertainty on the impact of the banking collapses in California, but a few executives I spoke with sounded unafraid of the ramifications, similar to the concerns of a recession back in 2022.

Maybe this is for a good reason: Adam Sacks, president of Tourism Economics, provided an economic outlook for the remainder of the year during his “Can the Travel Industry Defy Economic Gravity?” panel. Sacks said a recession is projected to occur in the third quarter this year, but it’ll be mild due to the liquidity saved up by households, corporations and governments.

Not only will a potential recession have little impact on the hospitality industry, but Sacks said there’s a runway for growth as business and international travel continue to pick back up and consumer spending on services normalizes.

The comparison isn’t apples to apples, however. It must be noted that the lending environment is already in a rocky place, and the effect of the banks collapsing is yet to be seen.
— Trevor Simpson, associate editor
@HNN_Trevor

Hoteliers across the spectrum of the industry are happy to be dealing with "normal" issues such as the turn of the cycle, challenges around financing and maximizing the gift that keeps on giving — high hotel demand. Just take a look at the quote from Xenia Hotels & Resorts CEO Marcel Verbaas above to sum it up.

Sure, worries over what the latest banking failures might exacerbate are there: Owners on the "Wall Street Talks" and "Main Street Talks" panels Tuesday said the fallout likely will be tightening especially in regional banks, some changes in terms and perhaps even a "flight to quality," turning the needle from small owners as net buyers back to real estate investment trusts. But in general, given high interest rates and the still-present bid-ask gap, it's not like potential buyers have been riding a high recently anyway.

While transactions haven't been headline news yet this year, speakers did remind the audience that one side effect of more bank tightening could be seen later this year as CMBS loans come due and brands put the pressure on owners for renovations. Owners that can't get loans may just put more hotels up for sale.
— Stephanie Ricca, editorial director
@HNN_Steph

It has been reassuring to hear that well-capitalized investors are looking to do deals right now, especially amid the uncertainty swirling around the banking crisis in the U.S.

What types of deals have there been? From what I’m hearing, there’s still plenty of appetite for consolidation among third-party management companies. These companies seem to be eager right out of the gate this year in acquiring other third-party managers.

One example: Banyan Tree Management's launch of Aperture Hotels. Aperture Hotels President and CEO Charles Oswald said the new company will continue to provide hotel management services but with an eye on growing its third-party management company through strategies including management company mergers and acquisitions.

Another example is global third-party management company Aimbridge Hospitality's acquisition of Houston-based Terrapin Hospitality’s management portfolio of 71 hotels across the U.S.

Keep your eyes and ears open for more of this activity. If owners are forced to sell their hotels, either due to inability to refinance loans or keep up with renovation costs, that breeds an environment for new management companies to swoop in.

— Dana Miller, senior reporter
@HNN_Dana

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