The kick-off panel was the first of two speed statistics sessions. Adam Lair, managing director and senior partner at HVS, said the industry is still facing a multiyear recovery, with a full recovery expected by 2024.
“We're seeing assets that have recovered to their pre-pandemic peak and likely recovered to their pre-pandemic intrinsic value,” he said. “We're also seeing assets in markets that are trailing that still have a lot of a lot of runway left to go.”
The labor shortage and wage growth are issues the industry continues to grapple with, Lair said.
“Labor shortages seem to be working themselves out at this point, but it's still an item that is causing problems for a lot of operators and still on the table, hand in hand with that wage growth,” he said. “I know a lot of you see many markets where wage growth is upwards of 25 percent or more.
Another issue he pointed out is inflation.
“What does inflation do beyond this year?” he asked. “If it's not transitory, how much does it cut into the [earnings before interest, taxes, depreciation and amortization] growth that we had seen in the prior cycle?”
Mark Lomanno, partner and senior advisor for Kalibri Labs, pointed out that while average daily rate has been at 2019 levels over the past few months, it’s not necessarily going to stay that way: “Primarily because the business mix is going to change again,” he said. “[In 2022] there's going to be a lot more groups, corporate travel, we're going to have negotiated rates. It's going to lower it down.”
ADR during July 2021 was the highest ADR ever, according to Vail Ross, SVP, global business development and marketing for STR. And in August, it was the highest ADR for an August in the the 35 years STR has been in business.
“So as we move into the fall months and into winter, obviously what's going to be very key is getting that group and corporate business back as the summer months start to slow down and summer travel starts to slow down. School is back in session, we're naturally going to see that leisure demand start to decline. The sooner that we can get some of those corporate groups back, the better.”
Rachael Rothman, head of hotels research and data analytics for CBRE, discussed the potential for remote work to impact the lodging industry.
CBRE broke down the markets based on annual commuting costs, the percentage of work from home or remote-friendly work opportunities and then the percent of workers who worked remotely prior to the pandemic, all indexed to the most impacted market: Washington, D.C.
“What you'll see is that the tech-heavy markets and the high-performing office markets … have a long history of remote work, and that has become even more prevalent as a result of the downturn,” she said. “In the middle are markets that are creative markets like Los Angeles, transactional markets like New York City, research markets like Boston, and markets with shorter commute times and those are markets where there will continue to be the need for office density and full occupancy.
“… Markets where there's less tech prevalence, less office density and yes, shorter commute times but less need for that type of work, those individuals show up in person in agricultural businesses, in tourism-related industries, and so we would expect to see less impact from remote work.”
Speed Statistics Part II kicked off with a snapshot of the construction pipeline at the close of the second quarter of 2021 from JP Ford, SVP and director of global business development for Lodging Econometrics. The 4,787 projects in the pipeline accounted for 598,000 rooms, with the rooms number standing at where the numbers were at the end of 2016 and the number of projects comparable to the third quarter of 2016, he said.
“The pipeline continues to be strongest for brands in the upscale and upper-midscale chain scales and it's been that way for probably the past 10 to 12 years,” he said. “By comparison, there's very little luxury development happening. Another point I want to make … is that there 600 projects in the pipeline that are currently unbranded; typically, about 90 percent of those will ultimately select a brand. Going back even a couple quarters before COVID, the number of unbranded projects in the pipeline has consistently hovered right around 600.”
In terms of new hotel openings in the U.S. during the second half of 2021, Lodging Econometrics is forecasting 51,754 rooms to open, resulting in a 2 percent growth rate for 2021. LE also is forecasting a 2 percent growth rate for 2022 and 2023 as well.
Katie Moro, VP data partnerships, hospitality for Amadeus, shared a recovery perspective based on airline and hotel reservations, saying that pre-COVID, airlines saw about 8 million reservations made every week and hotels saw about 7 million. During the pandemic those numbers turned negative, but those numbers reached their highest point of the pandemic during the summer.
“We kind of went down a little bit at towards the end of August but you're definitely seeing an uptick in reservations now,” she said. “So, the week ending Sept. 19 from a hotel perspective there were about 5 million reservations made for any future date and on the airline side 3.7 million. Definitely moving in a positive direction.”
Labor statistics rounded out the panel, with Del Ross, chief revenue officer at Hotel Effectiveness, pointing out that last April the industry let more than 6 million employees go—from a total of about 8.3 million.
“From January to July of this year, we hired more people during that time period than we've ever hired in a short period of time in our industry’s history: over 2.4 million people were hired back,” he said. “We saw attrition levels there in jobs like housekeeping, which are always high—we almost always replace every housekeeping role at least once a year—we saw that increase by over 60 percent. Same thing with guest services, but what's really distressing is we started to see the wear and tear on our salary management staff.
“We normally lose about one third of assistant general managers and managers every year. As of the annualized attrition rate in main June, we saw we were on pace to lose every single assistant general manager in North America. Now that doesn't mean we lost them all in May and June, [but] we are on pace to do so.”
Ross said the industry not only needs to be aware of this trend, it also needs to make sure it’s investing in recruitment, onboarding and training, and also looking for ways to prevent it.
Check HM’s website in the coming days for more Lodging Conference coverage, including an economic outlook from economist Bernard Baumohl and A View from the Top panel.