The Hospitality Industry Outlook: A Road to Recovery
Insights and Predictions from this year’s Hunter Conference
Our team was grateful to attend this year’s Hunter Hotel Investment Conference in Atlanta, GA. The 3-day event is a platform that provides a space and time for hospitality and lodging leaders to connect, build, and invest in meaningful relationships, and promotes new insights, networking opportunities, and measurable returns on investments.
In the wake of the COVID-19 pandemic and its subsequent ripple effect particularly on the travel and hospitality industry, we were excited to be able to safely travel to the conference and gain new information and understanding about the state of the industry as well as the behavior of investors and developers.
As a general contractor with a speciality and expertise in hospitality construction, we’re paying particular attention to the industry’s recovery as well as future trends we might see on the horizon. For those that couldn’t attend, here is a quick run down of what prominent speakers from the event spoke of, as well as what we gleaned from this informative and beneficial event:
Travel
Economists are confirming that vaccinations and travelers’ confidence are quickly turning the trends. Currently this is only for leisure-related travel, with business travel on the horizon. Overall, many expect this summer to be even stronger than that of 2019, the year prior to the pandemic.
Additionally, there is a huge pent up demand having to do with money saved, which is currently driving the leisure travel and resorts markets. Though large, urban centers are still suffering, all signs are pointing to an increase in business travel that will kick in within the next 3 months.
Hotel Value
On the hotel valuation side, any hotel in the south, the southwest, and the southeast is currently valued higher than it was pre-pandemic. Wall Street has a lot of money to spend, and they are more than happy to overpay in order to buy any hotel that fits their criteria right now.
Labor
A huge, widespread issue across the industry is the availability of labor. We’ve even seen this within our own construction industry, as the shortage of trade/construction labor has been increasing for years.
Though this shortage is spread across many industries, it is resulting in some hotels to not be able to sell all their rooms, since there aren’t enough staff to keep them clean. There are three main reasons for these shortages:
1. Hospitality wages are competing against unemployment stimulus boosts, and people are seeing that they can make more money at home than at work.
2. Larger companies like Walmart, Starbucks, and Amazon are all adopting a $15 minimum wage, which is far from the norm in some markets so here again, the labor pool is moving toward higher paying jobs.
3. Finally as vaccinations continue to roll out, there is a share (it’s small but it still exists) of people not going to work for fear of getting sick.
Development
There are huge challenges being faced on the hotel development side with construction cost increases and supply chain issues. These problems are making new builds less and less desirable in comparison to existing, readily available properties with a track record may cost less money than brand new ones.
Additionally, there is a lack of construction funding. Banks are still holding back on financing new construction. As we know, a lot of developers have projects they want to push forward, but many banks are not there yet and projects cost are up. Banks continue to be hesitant because they still have to work with a lot of hotel owners on forbearance deferment and discounts on existing loans for existing hotels. It looks like it will take a little more time for banks to encourage the fueling of additional supply, especially since a lot of markets were already starting to get overbuilt pre-pandemic.
The Future
We’re at the point where everyone sees the light at the end of the tunnel, but overall it’s a mixed bag. People are traveling again, hotels will continue to get fuller over the next few weeks and months, and construction cost increases will make new construction more difficult. Some places, like our state of Florida, are already finding their hotels filling up with bookings, but finding labor might create long term operational changes, such as rooms only getting cleaned upon request, or no more free breakfast buffets.
Regardless of the challenges and obstacles still ahead, there’s plenty of good news, and recovery is hailing a lot faster than anyone ever anticipated, even as of December of last year.
