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We’re Watching These Lodging Trends & Challenges—Are You?

It’s May 10, and our May 21st/NYU edition is going to the printer today. Senior Editor Gregg Wallis just returned from Meet the Money, a national hotel finance, investment and value-creation conference in Los Angeles, and will report on the full event in our next issue, June 7th. In some of the preliminary coverage, however, in a piece published online at hotelbusiness.com, he outlined the top 10 lodging industry trends and challenges, as unveiled by the Lodging Industry Investment Council (LIIC), based on input gathered from a survey of its members.

You might have read about it on our website, or maybe in was in your inbox when you received our e-newsletter. But, heading into the NYU Investment Conference where industry leaders and forecasters will take a deep dive into the investment landscape of our business, I thought the list of 10 was worth repeating here—almost like a checklist of the topics you can expect to hear about and discuss (or debate) when we’re all gathered together at the Marriott Marquis in New York City in the beginning of June. It will be interesting to see if these top trends are top of mind at NYU—and which ones.

One of the 10 is surely top of mind here at Hotel Business, hence our cover story. It’s number four on the list, to be exact, and falls under the header of “the top three threats to your investment.”

Specifically, the threat is this: Low unemployment (availability of labor). The unemployment rate is 3.9% at press time, as reported by the U.S. Bureau of Labor Statistics. The impact on hotel NOI from not only rising labor costs, but simply the availability of quality employees is worrisome for half of LIIC members (up from a quarter last year). Moreover, 78% believe their hotels have been negatively impacted by the low availability of qualified employees. The shrunken labor pool, for many hoteliers, is one of the biggest challenges they’re facing today.

As our cover story reports, it’s a tight labor market and there has been a steep decline in the number of hospitality roles being fulfilled. And hospitality managers are having difficulty finding quality employees. Moreover, it’s predicted that this shortage is only going to get worse. Hotel Business talks to analysts, associations and educators, among others, about what is becoming a crisis situation and how the industry should address it.

Now, back to the list. Rounding out the aforementioned 10 with a few key takeaways are:

  • Hotel real estate—floating forward in a fluid market. It’s business as usual… The hotel transaction market is fluid; hotel assets are trading.
  • Hoteliers say Trump is good for hotel owners. The tax reform bill will positively affect owners and the economy will continue on an upward swing.
  • Hotel property values flat to increasing slightly. Upscale and upper-upscale segments are the sweet spots for buyers today.
  • Threats to our hotel investment. In addition to labor shortage, new lodging supply and increasing interest rates keep hoteliers up at night.
  • Hotel transactions for 2018. The total number of assets forecasted to be sold by year-end 2018 is evenly mixed.
  • Hotel debt—the impact of increasing interest rates. In general, the market is still better for refinancing than selling.
  • New hotel development slowing. But it’s still a good time if you’re selective about product and markets.
  • Hotel buyers ask: Where’s the beef? A “below average quantity” of hotels is available for purchase and the overall quality of assets on the market is slightly worse than 2017.
  • Scary hotel markets. The top three markets not to buy in—Nashville, St. Louis and Detroit.
  • Are hotel asset packages still hot? Sellers are wondering, do investors want and will they fundamentally pay a premium for packages of five or more assets? The opinion is virtually split.

Do you have an opinion on any of these? I’m sure you do. And some perspective and insight as well. We’d love to hear them and share them with your colleagues, our readers, and create engagement on the issues you face every day. When you get a moment, drop me a line at [email protected] and let me know your thoughts.

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