Room rates are rising. RevPAR continues its steady climb. Occupancy rates are hitting record-highs in many cities. The hotel industry looks healthy, but some are concerned that the future may hold some serious challenges.
“Everyone quickly switched from saying ‘we’re going to have 4 to 6 percent growth for the next three years’ to ‘we’re at the end of the cycle, how bad will it be?’” Wes Golladay, analyst at RBC, said in a recent interview with The Financial Times.
As new hotels open their doors around the world, the basic law of economics may come into play. “From a supply and demand perspective, you might reach equilibrium this year,” Golladay added.
Outside analysts aren’t the only ones looking ahead with some uncertainty. “We look at a world in which there is obviously more anxiety in the marketplace,” Arne Sorenson, CEO, Marriott, said. “There is a bit more anxiety about what GDP growth is going to look like in 2016.”
While everyone agrees that this anxiety is real, some believe that the short-term future for hotels still looks bright. “We are not blind to current events and realize that non-economic risks do exist given the current international security environment,” R. Mark Woodworth, Senior Managing Director of PKF-HR, said when the company announced its optimistic forecast for hotels at the end of 2015. However, these are events which we are unable to forecast. Based on what we do know and feel comfortable forecasting, the probability of an economic downturn in U.S. hotel industry performance remains remote.”
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The Race To Engage A New Generation Of Guests
From cheap oil prices to uncertainties in the Chinese stock market, the hotel industry’s health relies on a range of factors well outside the control of the companies that manage or own properties around the world. However, there is one area where hoteliers do have some control: how their properties appeal to an emerging cast of business and leisure travelers. With that in mind hoteliers are aiming to sway Millennials as they determine what kind of away-from-home experience they prefer.
Marriott opened the doors of the first Moxy hotel in the US, which includes arcade games in the lobby and record players in the guest rooms. Hilton recently launched Tru, a brand that the hotel says will unite guests with “a youthful energy, a zest for life and a desire for human connection.” And Starwood’s Aloft brand recently debuted a room service menu that allows guests to order without using any words; it’s all emoji-based.
What do you think the future looks like for the financial health of hotels? And are they managing to connect with younger guests to ensure that their rooms will be full? Go to Catalyst to share your thoughts.