hotelAVE ALIS Top 5 Takeaways

1. Listless RevPAR Growth:  Projected to grow between 0.0% to 1.1% in 2020 due to new supply exacerbated by alternative accommodation growth. All revenue growth is proposed to come from rate which is unpredictable due to lack of operator confidence in pricing.
2. Uncertain Macro Environment: With an election year and a volatile geopolitical environment, there is significant uncertainty in the market in 2020. Uncertainty creates corporate paralysis. Economic fundamentals are decelerating with GDP projections for the U.S. at 2.0% or less, and the industry will also be vulnerable to global events such as the Coronavirus scare and future trade wars.
3. Robust Cheap Capital: The low-interest rate environment will provide sellers with alternative options to recapitalize as lack of short-term tailwinds in hotel fundamentals may keep transaction volume low.
4. Labor Market Remains Tight: The U.S. unemployment rate will stay at record lows in 2020, and over 800,000 jobs are expected to be available in the hospitality industry alone. Operators are relying more on contract labor as a result in many markets, and employee retention is key to avoid the substantial recruitment expenses and costly usage of overtime.
5. Permanence of Alternative Accommodations: The short-term rental market is maturing and is estimated to reach 12.2% of total hotel room supply in 2020 according to CBRE. While some hotel segments such as the luxury sector are relatively unaffected by short-term rentals, this shadow supply (which includes AirBnB, Sonder, Churchill Living, Stay Alfred, Domio, Selina and AutoCamp) has made a meaningful impact on hotels’ ability to drive rates, particularly over compression periods.