NASHVILLE, Tennessee — Hotel asset managers are feeling more confident about growing both revenue and profitability in 2024, but still hold major concerns about the strength of demand, as well as increasing costs from wages and insurance, according to the latest survey from the Hospitality Asset Managers Association.
HAMA released its Spring 2024 Industry Outlook Survey this week at its 2024 Annual Spring Meeting, with the organization's leadership noting an uptick from their fall survey in asset managers' expectations of hotels beating their budgeted numbers on revenue and gross operating profit. In total, 70.6% of respondents expect 2024 to have higher revenue per available room across their portfolios compared to 2019.
A total of 68 asset managers participated in the survey.
Survey respondents were close to an even split on whether this year or next will see the return of U.S. RevPAR performance to pre-pandemic levels. About 42.7% expect to see that milestone in 2025 while 41.2% say it will happen this year. Respondents are slightly less optimistic about the top 25 U.S. hotel markets, with 54.4% expecting them to hit pre-pandemic RevPAR levels in 2025 compared to 29.4% that expect to see that happen this year.
When asked to describe the feeling at the moment, Derrick Yee, vice president of asset management for Placemakr, said it's "generally positive but maybe less enthusiastic."
"At the end of last year, we thought, 'Yeah, it's going to be really great next year,'" he said. "But we've seen a pullback in [leisure] transient. And corporate, while it's still growing, we're still not capturing all that. Then in certain markets that have seen a lot of new supply, what does that do when we actually hit the next fully compression period with summer travel?"
When asked to rank their top three concerns for the industry, 60.3% of asset managers said "demand" with HAMA board members indicating there are persistent concerns about softening demand from leisure-transient guests who are reluctant to pay higher rates at resorts and have cheaper options in things such as cruises.
The only other concern to be shared by a majority of respondents was wage increases for hotel employees — at 55.9% — followed by increased property insurance costs in a distant third place at 41.2%. Labor issues have dominated the survey results in reason years, but "labor availability" was ranked as a top concern by just 29.4% of respondents, and HAMA board members indicated there have been clear signs of improvement in that regard, although it's still a major issue hoteliers face.
Board members did indicate issues related to wage increases have changed in the past year, from being more broad-based to being more correlated with increased union activity.
"The issues around wage increases are different than they were 12 months ago," said Chad Sorensen, managing director and CEO of CHMWarnick. "Twelve months ago, we were still trying to figure out when the industry would be able to stop giving raises with salaries and wages increasing. It seems to have somewhat stabilized this year."
Despite concerns about the broad demand environment, hotel asset managers seemed relatively unconcerned about the broader economy, with just 10.3% expecting a recession this year, and similarly only 16.2% see the U.S. presidential election as a concern for the hotel industry.
The group also expressed optimism in terms of the debt environment. While there have been regular headlines about pending waves of debt maturities in the hotel industry and for broader commercial real estate, a majority of respondents — 58.8% — indicated less than a quarter of their portfolios need refinancing over the next 12 months. Even fewer — 7.4% — see any possibility of handing back keys to lenders.
Sorensen tied some of the broader optimism felt by the group to the fact that the industry has "stabilized from an operations standpoint" and that gives asset managers more ability to be proactive.
"We were just trying to stay afloat in many cases last year, so I think the positive is with that stabilization, we'll be able to focus more on the actual operations, guest experience, etc.," he said.