LOS ANGELES — Many
panelists at last week’s Americas Lodging Investment Summit (ALIS) suggested that North American lodging demand is due for a slowdown and
that the best development opportunities now lie outside of the so-called
gateway cities where demand has been the highest in recent years.
While 2015 marked
record-high U.S. hotel room demand, doom and gloom prevailed, with terms like
“clouds on the horizon,” “stench in the economy,” “pullback at the end of the
year,” and references to an up-cycle that’s “long in the tooth” peppering
comments from conference panelists.
Part of that mood might have been
influenced by missing attendees; while a record 3,000 people registered for the
event, attendance was thwarted somewhat by the East Coast storms that forced
the cancellation of many westbound flights.
combination of recent stock-market volatility — the result of China’s
chaotic economy and plunging energy prices — coupled with the continued growing
strength of the dollar, which is reducing the affordability of inbound travel from overseas, had many of
the conference’s analysts, hoteliers and developers voicing concern.
And while attendees noted
that hotel room supply growth remains slow relative to historic levels, the
growth of Airbnb continues to be a worry for hoteliers, especially for those
operating in larger cities where the home listing service has been most
“There are definitely some
winds swirling,” Hilton Worldwide CEO Christopher Nassetta said on an ALIS
panel last Tuesday. “There are a lot of things happening in the world causing a
lot of people to put the caution flags up.”
Marriott International CEO
and fellow panelist Arne Sorenson, referencing the recent stock market
volatility, said, “Yesterday was a disaster, today was huge, last week was more
of the same dynamic. Everybody looks at that and asks, ‘Are you seeing that
somehow in your business?’”
questions were being asked in the wake of the strongest U.S. lodging year on
record, according to STR. U.S. revenue per available room (RevPAR) rose 6.3%
from a year earlier. While that marked a slowdown from 2014’s 8.3% RevPAR
growth rate, it reflected room rates that rose 4.4%, to $120 a night, and an
occupancy rate that advanced 1.2 percentage points, to 65.6%.
Moreover, STR’s figures
suggest that the best bets for hotel-demand growth are outside of the coastal
cities and, in some cases, north and south of the U.S. border. New York City’s
RevPAR fell 1.7% last year (only Houston’s 3.3% RevPAR drop from the energy
crash was worse) as room supply grew and international tourism slowed, while
Airbnb listings might have whittled away some demand. San Francisco’s RevPAR
growth slowed to 7.5% from 13% the year prior.
Meanwhile, southern U.S.
markets flourished, hinting that developers might do best by investing in
markets where employment is steady and a drive-market contingent accounts for
most tourism dollars. In Florida, Tampa/St. Petersburg’s 14% RevPAR jump was
the fastest of the largest 25 U.S. markets, while Phoenix and Nashville had a
13% and 11% RevPAR increase last year, respectively.
“The consumer’s not
feeling great, but he or she is feeling just good enough to spend a little
money,” said economist and former White House senior adviser Todd Buckholtz
during one of ALIS’s keynotes. “So the hotels and motels that are conveniently
located and make their living off of these [drive-market] destinations are
probably in a pretty good position and at less risk than the so-called gateway
strengthening dollar and rising room rates in cities such as Miami, Seattle,
Honolulu and even the Caribbean are pushing some prospective travelers to
Canada and Mexico. Cancun saw an 82% occupancy rate in 2015, while last year’s
announcement of a Ritz-Carlton slated for Mexico City in 2019 reflected that
locale’s draw for higher-end travelers, both leisure and business, Mark Lunt,
hospitality leader for EY’s (formerly Ernst & Young) southeast, Latin
America and Caribbean region, said in a round-table discussion.
RevPAR spiked 18% last year, largely on travelers who would otherwise have
visited Seattle, said Carrie Russell, managing director at HVS Canada, in a
separate round-table discussion. She added that lodging demand in Alberta’s
Banff and Jasper areas was also up.
Still, there were some
signs of continued optimism for the U.S. lodging industry. Hilton used the
event to tout its new Tru midscale brand via a full-scale model of the
concept’s lobby area and guest room and said it had already reached agreements
to open more than 100 properties throughout the U.S.
“What we’re reporting
isn’t what it used to be, but it’s still pretty good,” said ALIS panelist and
STR Senior Vice President Jan Freitag. “We’re all going to make money in this