A new survey from the Hospitality Asset Managers Association highlights how few U.S. hotels will exceed their budgets in 2023, which HAMA board members attributed to high revenue and profit expectations coming off a strong 2022 and 2021.

But while asset managers are worrying about how softening demand and increasing labor costs will affect their bottom line, few are seeing much potential for distress within their own portfolios. Here are some of the highlights of the survey.

HAMA's fall survey of membership showed a large majority don't expect to exceed their 2023 budget in terms of either revenue per available room or gross operating profit.

HAMA board member and Vice President of Asset Management at Placemakr Derrick Yee said this is not a symptom of poor performance but of high expectations.

"It is still a little bit market-specific," he said. "There's definitely some markets where people are still feeling like they're performing well. However, I think there's a lot of people feeling they weren't exceeding or meeting their 2023 budgets in part [because of] aggressive budgeting year over year. Also, there has been some market pullback year over year."

The membership survey reinforces this is largely an issue of high-but-unmet expectations. Sixty-one percent of respondents said they're still seeing RevPAR increases versus 2019. At the same time, more than 70% said they've engaged cost containment or contingency plans for the year to help manage their budgets.

HAMA board member and Atrium Hospitality Vice President of Asset Management Emily Miller agreed it's less about underperformance and more about "normalization."

"So while we may not be hitting the double-digit growth that we all were hoping for and budgeting for, we're still seeing growth," she said. "It's just not as great as we had expected."

A possibly dismaying sign for hotel investors looking for deals is that HAMA members by an exceedingly wide margin saw little concerns for distress within their portfolios. Less than 10% foresee having to hand back keys to a lender and just 3.9% said they've already done so.

When asset managers were asked to rank their top three concerns, wage increases and demand were the clear favorites, at 62% and 61%, respectively.

Labor availability (48%) and increased insurance costs (47%) were the next highest-ranked concerns.

While labor costs are habitually a top-ranking concern in the twice-annual survey, HAMA President and CHMWarnick CEO and Managing Director Chad Sorensen said there are some encouraging labor signs, in general.

"Labor availability has definitely gotten better," he said. "It's been a tale of two halves this year. While we're not out of the weeds yet on the labor front, it's starting to feel like we're starting to become more normalized."

HAMA board members also said there's talk among the membership of getting more creative with non-healthcare insurance costs in an attempt to curb costs.

"Several members have discussed their portfolios and are considering self insurance and taking a lot higher deductibles, just taking a lot more individual risk because of the way insurance was pricing and what's going on in the insurance markets," Yee said.

What apparently isn't a worry among the HAMA membership, though, is an economic recession. While economists have been widely calling for a recession in the near future for a while now and the Federal Reserve continues to push the narrative of high interest rates for an extended period of time, roughly two-thirds of HAMA members don't think there will be a U.S. recession in either 2023 or 2024.

In fact, a majority (55%) expect 2024 to be a strong year for the hotel industry, and the point at which hotels broadly exceed 2019 RevPAR performance.

Sorensen said the view among HAMA membership was in line with the optimism he heard and felt at The Lodging Conference recently.

"The perspective is unemployment is just too low for there to be a recession," he said.

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