Nina Owen, MAI Attends NYU Hospitality Investment Conference

junio 13, 2023

Nina shared many insightful takeaways from the conference. She says, «I enjoyed attending the NYU Hospitality Investment Conference last week. It was a great event that provided many insightful highlights: 

Fundamentals: Occupancy and ADR are at or above 2019 levels in most US markets. The industry appears to have recovered from the business disruption caused by the pandemic. Supply growth is constrained, a trend that is expected to continue as it is harder to move projects through the pipeline from planning through construction, due to capital market constraints and a tight labor market. As a result, RevPAR growth, for existing hotels, should be possible in the near term in most markets.

Consumer Behavior: Some of the shifts in travel patterns that came to the forefront during the pandemic seem permanent. Work from anywhere allows individuals to extend work trips for leisure purposes. Remote work increases the need to bring together teams in person, which has a positive impact on corporate group demand. Individual Gen Z and Millennial travelers remain focused on experiences such as travel as opposed to the accumulation of goods.

Recession: A recession may be on the horizon, or we may be in a recession already. Either way, many feel that the hospitality industry will be insulated from the economic downturn to some degree. The shifting consumer behavior has decoupled the historical correlation between GDP and RevPAR.   In addition, cost-cutting necessitated by the pandemic improved hotel operating margins. Hotels are running more efficiently, which should improve operational resiliency going forward.

Investment: Higher interest rates and increased risk aversion will lightly constrain the debt markets for the next 12 to 18 months. Less landing from commercial banks could cause a shift to private credit and CMBS.

Despite some headwinds, such as the threat of a recession, the tight labor market and the rising interest rates, the average equity yield on hotels is in the mid to high teens for all property types, making hotels an attractive CRE investment on a risk adjusted basis.»