Recovery Ramps Up
BITAC Independent Points To Potential Return Of Business Travel As Key
The lodging industry recovery continues to gain momentum on the strength of a busy summer leisure travel season, as well as the prospects of an uptick in business travel that could boost performance projections for 2022, according to panelists at last week’s BITAC Independent Live 2021.
Taking place at JW Marriott Marco Island in Florida, the executives offered their thoughts during a session entitled “Recovery Effort: Independent Owner/Operators Gear Up For Second-Half Spike In Hotel Demand.” While the panel pointed to a number of positive signs for the industry—particularly as it relates to business travel—the executives also expressed concern about the COVID-19 Delta variant and its potential to derail the recovery.
Todd Felsen, President and CEO, Our Town Hospitality, framed the discussion.
“It seems that a lot of the markets around the country right now are just about stabilizing to 2019 levels. The rest of this year is all about the leisure traveler and hopefully we’ll get that business traveler back some time in October. We see groups [booking] for the fourth quarter, which is really enticing,” he said.
Felsen provided a positive longer-term outlook as well. “We’re on the right track. We’ve got to keep safe and do the right things for our customers and our employees and I think it’s going to be a good 2022,” he said.
Paul Breslin, managing director, Horwath HTL, noted August has been something of a mixed bag with a high rate of bookings as well as a high rate of cancellations.
“It’s kind of bi-furcated. There are a lot of people with optimism and a there are a lot of people that are pessimistic. We also see corporate coming back at several of our hotels. It’s not nearly anything to get excited about, but it’s a start,” he said.
Nevertheless, Breslin believes the industry is poised for an uptick.
“Our business travel clients are telling us that their senior folks are ready to get back to work. When the Deloitte’s and PWC’s of the world really put down the hammer and say ‘ok, we’ve got to go make some money’ I think that corporate will be back,” he said, later adding, “I think the leisure [segment] is going to continue to be pretty strong. There’s a lot of demand for it.”
David Messersmith, principal, PAD Real Estate, LLC, was equally bullish on development prospects, as well as the return of corporate business.
“You are seeing the business start to come back. The senior executives are getting back out on the road and the typical road warriors are starting to get back out there and do face-to-face sale stuff,” he said.
Felsen further explained the busy summer season, which he noted has also resulted in record ADRs for much of the company’s portfolio.
“If you look at the travel boon this summer a lot of people postponed their vacations outside the U.S. because they were afraid to travel. All of those people that were going to travel to Europe this summer are now vacationing here in the United States,” he said.
Messersmith did provide some reason for caution while offering a call to action.
“I hate to be a Debbie Downer, but this Delta variant is concerning. A 5 or 10 percent shift in occupancy is a huge deal to a hotel. We’ve got to get everybody vaccinated. If you’re in the hotel industry and you’re not vaccinated shame on you; that’s all I can say,” he noted.
Felsen reinforced the point.
“This morning I got some bad news, some of the groups that were booking now for next month or were already booked are canceling again. So we’re going to have to watch this really carefully,” he emphasized.
Meanwhile, for those looking to grow their portfolios—either through acquisition or new construction—there have plenty of challenges. When it comes to asset values, Felsen pointed there are few bargains to be had.
“We all thought that there was going to be major foreclosures in assets across the entire country, really the world for that matter, and it never happened. The reason it didn’t happen is there were so many forbearances and agreements made with the banks. The banks don’t want the keys, what are they going to do with it? The banks basically said ‘you want to close the hotel, you’re going to manage it.’
He continued, “The values of the real estate got hurt for a while, but now it’s back. It’s going to continue to get stronger, that’s what’s great about this business. At the end of he day it’s all about the real estate play. There’s a lot for sale right now and people are asking top dollar for a lot of these great hotels because they know they can get it,” he stated.
Breslin agreed noting that his company was looking to execute an acquisition as part of a 1031 exchange for a client and “the properties we were looking at were all very high priced…[Discounts] were not there at all.”
According to Messersmith, “This is a really tough time to be doing construction. The costs are really hard to predict,” he said, noting that’s due in part to supplies being in short demand and labor difficulties.
Messersmith did note that “banks are starting to loosen up” and that LTV ratios have become more reasonable in recent months.