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HB ON THE SCENE: Outlook Positive, Labor Costs a Concern for Asset Managers

DENVER—Hospitality asset managers have a positive outlook for the near future, with more than 60% forecasting that seven to 18 months remain in the current RevPAR growth cycle. More than 90% see rising labor costs as an issue.

Those are the findings of a survey released by the Hospitality Asset Managers Association (HAMA) at its fall conference held here at the Le Meridien Denver Downtown. The 2018 numbers for the survey match those of the previous year for the outlook.

“This year another 20% said that they thought the cycle was going to last another 19 to 30 months, which is considerably more than last year, when it was under 10%,” said Matthew R. Arrants, ISHC, CHAM, EVP with Pinnacle Advisory Group and a member of the HAMA board of directors.

More than 55% of respondents said that their hotels are meeting or exceeding the 2018 year-to-date budget. For those not meeting or exceeding budget, nearly 50% saw an occupancy increase of 0% to 2% for the year so far, compared to approximately 15% seeing that increase in last year’s survey. Nearly 30% saw a 0% to 2% increase in ADR, compared to 5% last year.

In terms of 2018 full year forecast versus 2018 budget, 40% of respondents reported a 0% to 2% increase in RevPAR, compared to 10% last year.

When it comes to the budgeting direction respondents are providing their hotels for 2019, on average, approximately 45% of respondents are saying a 0% to 2% increase. This compares to the more than 50% last year who forecast a 2% to 4% increase.

“They are a little more pessimistic about next year than they were last year,” said Arrants. “That could be because of the strong year and there is always a degree of pessimism that there will be a market correction. People are getting nervous about how much longer it will last.”

When it comes to the concerns of asset managers, more than 90% view the labor costs as a major problem. More than 80% worry about it negatively affecting their portfolios performance.

“The primary reason for this is that we are seeing it everywhere,” said Arrants. “You have the new Disney contract [with a minimum wage increase to $15], and then you have the new union contracts in San Francisco and other major cities. A lot of us are involved in those negotiations, and/or planning or looking at it from a budgeting perspective for next year. While some of them are minimum wage increase, that rolls up because if you are raising your bottom people, we have to raise others along the way.”

The asset managers were also offered a selection of policies that hotel brands should pursue in the near term to more closely align their reservation policies with the interests of owners. Nearly 40% said that guests should be allowed to choose their own rooms for a fee.