LOS ANGELES -- The hotel industry is confident that the GOP tax cuts passed last month will spur an increase in leisure and corporate demand as well as hotel development.

On the demand side, the tax cut will result in higher paychecks for many workers, and more discretionary income for leisure travel.

"There's nothing negative whatsoever unless you're a far right-wing deficit hawk," said Aimbridge Hospitality CEO Dave Johnson at the Americas Lodging Investment Summit. "The argument isn't 'Is it going to be good or bad for us?' It's 'How good is it going to be?'"

Corporate tax cuts are expected to spur companies to spend the windfall pursuing growth and, as a result, spending more on business travel.

"During the past couple of years, corporations have been focused on controlling the bottom line and returning capital to shareholders," said Susquehanna Financial Group senior lodging analyst Rachael Rothman. "Now, with the lower corporate tax rates, they're going to get more people out on the road, and that means growth in group business."

Further, a new tax provision that allows businesses to expense the total value of building improvements immediately may spur more hotel development, said CBRE Hotels senior managing director Mark Woodworth.

Wynn Resorts CEO Steve Wynn expressed his optimism during the company's fourth-quarter earnings call earlier this week.

"With the Trump administration, with Republicans in Washington, we are seeing this fabulous renaissance," Wynn said. "Any attempt to vilify or criticize this tax bill is a fruitless and pointless exercise. The impact of that tax bill, I can tell you, is a tsunami of business activity and growth in America."

At ALIS, Michael Barnello was a dissenter. The CEO of lodging real estate investment trust LaSalle Hotel Properties cited the Tax Reform Act of 1986, which he said did not achieve the desired results.

 

"I think it's great to say that corporate America has a bunch of money," said Barnello. "But the last time a tax overhaul was done in the 1980s, it didn't work. The spending didn't happen."

With U.S. hotel occupancy at a record level, both STR and CBRE forecasted a gain in revenue per available room (RevPAR) for 2018. STR, which said U.S. RevPAR advanced 3% last year, forecasted a 2.7% increase for this year and 2.4% in 2019.

CBRE was slightly more pessimistic, forecasting RevPAR growth of less than 2% for both 2018 and 2019, though it said occupancy, which reached a record 65.9% last year, would remain at that level through 2019.

Some ALIS panelists said that the tax cuts could spur GDP growth enough to make STR and CBRE's projections look conservative, and questioned whether the end of the positive-demand cycle -- now approaching eight years for the largest U.S. markets -- was near.

 "We spent the last 12 months looking over our shoulder," said Michael Van Konynenburg, president of Eastdil Secured. "There's a growing view that we have another leg in this cycle."

 Mark Elliott, president of commercial real estate broker Hodges Ward Elliott, said, "As an industry, we were so snake-bit and worried about the end of the cycle. Our view is that this cycle doesn't end in a recession, but in a soft landing, which we had. We may be in a new cycle."

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