"Good" is not a bad word when it comes to describing the mood and outlook for the U.S. hotel industry at the start of 2024. In fact, it’s pretty good.
In the latest episode of "Tell Me More: A Hospitality Data Podcast," recorded at the Americas Lodging Investment Summit in mid-January, CoStar National Director of Hospitality Analytics Jan Freitag and STR Vice President of Analytics Isaac Collazo agree that the hotel industry outlook is positive.
“The numbers look good,” Collazo said. “Good is all relative; it’s going to be a more moderate year in 2024 than what we saw in the last three years, but it’s still positive. It’s still [revenue per available room] growth. It’s what we want.”
Freitag said that there is a difference between the “cautiously optimistic” descriptor many were using for the past few months and the just plain “optimistic” sense he got from the annual investment conference.
While current interest rates are still keeping transactions sidelined, Freitag said sentiment is shifting, based on conversations he has had with major industry owners and investors.
“There’s no rate cut yet on the books, but psychologically, people will say, ‘We’re over this hump, it’s not going to get worse … so we can now plan a little bit better, we can underwrite a little bit better.’ Will that break the dam open? Will we see this flood of deals in Q1? Absolutely not. Q2: I doubt it. Q3: Hopefully, and then Q4, I think with a vengeance because people are going to be afraid to miss the boat.”
Another area of concern is what Freitag refers to as “the middle of the P&L.” Hoteliers want to talk about gross operating profit growth, he said.
“The top line is growing, but everybody’s worried about insurance costs, everybody’s worried about labor costs and everybody’s worried about taxes,” he said.
Collazo validated those worries, adding that for most of 2023, average-daily-rate growth was below the rate of inflation.
“It’s an issue we have to be very cognizant of,” he said. “Demand is basically back to 2019 levels, for all practical purposes, but it’s rates that are still lagging. And that’s going to be important. You have costs rising everywhere else.”
More From This Episode
Other topics in the episode include:
- Analysis of full-year 2023 key performance indicators.
- How the hotel industry might approach segmentation differently in the future, now that business travel trends no longer follow traditional midweek patterns.
- When hotel transaction activity might really open up this year.
- How analysts incorporate leap year’s extra day in February into the data.
- How hotels stack up against other commercial real estate asset classes to investors today.
- Why feeling bored in 2024 will be a good thing.
The Hotel News Now Podcast Network brings timely audio interviews, industry opinion and analyst commentary about the global hotel industry to life. Find podcasts here or search for Hotel News Now on Apple, Spotify or wherever you listen.