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Hotel Transactions
A significant increase in hotel transactions is expected, with approximately $5.8 billion of U.S. hotel securitized loans maturing later in the year. This is likely to drive substantial activity in the market. Further, there is an abundance of “dry powder” waiting for opportunities.
Development & Renovation Pipeline
The current hotel construction pipeline is the largest it's ever been. About 93% are 200 rooms or less. Extended stay hotels are the darlings of both consumers and developers comprising 39% of the new hotel construction pipeline. Renovations and conversions are at the highest point in history. Renovations postponed since the pandemic are now happening. The postponed renovations are naturally larger, and owners are increasingly looking at converting to a different brand.
Labor Challenges
Finding and retaining employees remains a significant challenge for hotels, with rising labor costs putting additional pressure on owners. The increase in labor costs and higher service levels are putting pressure on gross operating profit per available room (GOPPAR), which is down both in nominal and real terms in markets such as California, Oregon and Hawaii.
Softening RevPAR
There are indications of softening revenue per available room (RevPAR) with RevPAR growth not keeping pace with inflation.
Interest Rates
The Federal Reserve's interest rate changes have not yet significantly impacted hotel values, though this situation may change.
Guest Preferences and Industry Trends
There's a growing demand for offerings that are "different, experiential, memorable and desirable," particularly in the luxury lifestyle segment. This reflects the rise of the experience economy over material goods.
What's Hot
While it is a dry heat, 110 degrees is still very hot.
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