Hotel operators will close this year having generated record-breaking revenue growth in most cases, say analysts at STR, PwC, Truist, and Jefferies. Yet the crystal ball for next year is a bit hazy.
Sunday, November 20
It was a subdued NAREIT REITworld conference in San Francisco, judging by the analyst reports. Truist said that some U.S. lodging REIT management teams expressed concerns about cracks in demand forming with technology customers soon after recent layoff announcements. Truist said they found most management teams are resigned to leisure travel softening but are more positive and focused on the continued recovery of the laggard demand segments and markets, specifically higher-rated corporate travel, group/convention, and non-leisure urban markets such as San Francisco.
Jefferies said its takeaways from NAREIT include that with the era of cheap capital concluding, developments and acquisitions no longer pencil. The investment bank’s research analysts found most REITs believe they don’t have much to do other than sit back and wait for everything to settle out. REITs’ main defense is capital preservation and driving organic growth. They believe that urban, business transient, and group travel recovery is continuing, bullish for Lodging & Gaming REITs.
First Hospitality assumed management of the Inn on Sheridan, a boutique hotel in Zion, IL. The company also added the Holiday Inn Express Cincinnati West to its extensive roster of branded hotels. This marks First Hospitality’s first properties in both markets.
Skift Note: Real estate investment trusts have a delicate dance to do as they try to grab plentiful and lucrative opportunities while not getting surprised by recessionary trends. For example, it’s hard to judge the difference between pent-up group bookings demand versus a likely re-normalization of group trends in 2023 and beyond.
Monday, November 21
The supposed reopening trade for China stocks hit a speed bump as the realization set in with investors that Covid cases are not going down, in fact they continue to go up. For the sixth straight day, the number of new cases topped 20,000 with a new seven month high today of more than 26,000. Guangdong is once again has doubled their cases, reporting more than 9,000 today. A five day lockdown of the Baiyun district has been ordered. On another note, Hong Kong Chief Executive John Lee brought back a present from the Asia Pacific Economic Cooperation Forum in Thailand, testing positive for Covid when he returned to Hong Kong.
ONYX Hospitality Group said they reinforced their expansion plan with a strategic focus on its home territory of Thailand and neighboring destination, Malaysia. Their neighbor will be the first outside Thailand to operate all three brands. ONYX is also expanding their footprint in the Maldives, Laos, Sri Lanka, Hong Kong and Japan. ONYX said they are on track to operate 54 properties by 2025, up from the current 44 properties. In addition to expanding their regional footprint, they are also poised to reposition their three core brands, Amari, OZO and Shama in response to the evolving consumer landscape.
Skift Note: Preparing for Asia Pacific’s post-pandemic resurgence is getting tricky. Expect some opportunistic plays next year.
Tuesday, November 22
PwC watered down its 2022 U.S. hotel performance forecast in light of some weakening in demand in the final months of the year. The consultancy said it now forecasted occupancy for U.S. hotels this year “to increase slightly less than in our May 2022 outlook, increasing to 62.8 percent year-over-year.” Since March 2022, RevPAR has exceeded comparable 2019 levels. It now forecasts average daily room rates to increase 19.3 percent for the year, with resultant revenue per available room up about 108 percent of pre-pandemic levels, on a nominal dollar basis.
The U.S hotel industry reported higher performance from the month prior but weakened comparisons with 2019, according to October 2022 data from market benchmarking service STR. October 2022 (percentage change from October 2019) is as follows: Occupancy: 67.2% (-2.4%); ADR: $155.63 (+16.8%); and RevPAR: $104.59 (+14.0%). Find more from STR.
The number of foreign visitors to Japan rose to 498,600 foreign visitors in October, more than double September’s 206,500, thanks to the relaxing of some pandemic-related restrictions. The inbound international tourism figure was still down -80% on 2019.
Skift Note: Some context: the hotel industry is still doing much better than other sectors of the economy and it still has more room to claw back in occupancy even if it has to sacrifice a bit on prices as international travel slowly rebuilds.