Last year proved to be another one for the hotel industry record books: occupancy, average daily rate (ADR), and revenue per available room (RevPAR) all increased year-over-year. And while the rate of growth is diminishing as the economy slows down a bit and new supply continues to hit the market, changes to the tax code appear to have breathed new life into the recovery. Last year’s concerns over a possible decline in tourism to gateway cities proved to be generally unfounded, and we expect that to be the case as we move through this year as well.
The labor market is also incredibly tight with unemployment at a historically low rate of 4.1 percent. The good news? Wages are expected to rise as a result. And with household paychecks before and after taxes increasing, and corporate after-tax earnings looking more robust, room night demand is expected to increase across the leisure, commercial and meeting/group segments. (Indeed, January 2018 showed a 2.9% RevPAR increase over the same month in 2017.) The potential negative impact on the hospitality space is the specter of increased labor costs impacting property-level bottom lines.
Disruption will also continue to be the name of the game, as traditional hotel chains seek out new ways to compete with Airbnb and its ilk. As of the writing of this piece, Airbnb was worth an estimated $31 billion – a valuation that put it second only to Marriott International. (For comparison, consider this: Hilton Worldwide’s market cap is $24.7 billion.) This year, Airbnb appears poised to aggressively pursue the lucrative business traveler demographic, and global travel platform Concur recently announced plans to display its listings on the company’s search and bookings tool, which is used by more than 70 percent of Fortune 500 companies. In response, hotels are launching new, innovative services (and in some cases, entirely new brands) to lure back travelers seduced by homesharing sites. They’re creating experiences for customers that highlight local culture and neighborhood flair, and strengthening amenities and services to cater to the primarily millennial consumers who are most drawn to the sharing economy. How tax reform and the threat of stricter government regulation will affect homesharing remains to be seen, but hotels are recognizing that these powerhouses are here to stay and pose a real threat to market share. At Cushman & Wakefield, we’re watching this competition with great interest, and are committed to providing up-to-the-minute insights to our clients about the state of the market.
To that end, we’re also incredibly excited to announce the launch of our new hospitality website, accessible at www.cushwakehospitality.com. Check back frequently for updates on the status of the hospitality industry across the Americas.
Eric B. Lewis is the Executive Managing Director and Global Practice Leader of Hospitality & Gaming in Cushman & Wakefield’s Valuation & Advisory division. In 2016, the group was responsible for appraising properties valued at more than $56.8 billion, involving virtually every hospitality & gaming property type.