Did you miss the NYU Hospitality Conference? Don’t worry, just read hotelAVE’s Key Conference Takeaways!
Overall Conference Sentiment: We are nearing the end of the cycle. Every prognosticator decreased their 2019 RevPAR growth forecast (most now at 2.0%) and they are leaving themselves room to take it down further as the year progresses. Rate is now eroding along with occupancy which is a new trend.
Margin Erosion/ Labor Costs: Margins peaked in 2017. Labor, insurance and property taxes are growing faster than inflation. No one is talking enough about the lack of labor! hotelAVE continues to grow our margins via operational efficiencies and investing capital in projects that reduce operating costs.
Debt Markets Remain Robust: New debt remains competitive and plentiful. We heard a lot of institutional owners evaluating debt quotes at LIBOR +220-300 for 5 year paper or Swaps +175-275 for 10 year term. Refinance now with long term debt.
New Supply Continues: Rising construction costs are not slowing new supply; instead brands are re-engineering to less expensive prototypes, as evidenced in the new midscale brand rollouts.
Will Values Remain Stable? Transactions Slowing: HVS projects that values will remain stable but how can that be? That implies that cap rates will fall as NOI erodes. Buyers need a longer term view. The REIT panel reported 1Q19 transaction activity down 31% YoY, impacted by decline in portfolio level transactions (-74% YoY), while single asset sales are up 3%.
Big Technology Companies Pushing Into Travel: Google, Amazon and other tech giants continue to expand into the lodging space with the capability to offer the entire travel program
while hotel brands are focused on owning the customer and trying to offer relevant, targeted content to differentiate the overall experience.
Managing to forward trends is one way we maximize hotel profitability. To learn more about hotelAVE and our exceptional asset management and consulting services, please contact us.