Leading Meeting Professionals

Professional Convention Management Association

August 01 2016

Economic Uncertainty Is Hampering Hoteliers

David McMillin

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Britain’s decision to leave the European Union, the Turkish military’s attempted coup, the US Presidential race — 2016 has been defined by the unexpected. As these surprises shake up the global economy, the hotel industry is feeling the turbulence. Last week, both Hilton and Marriott announced Q2 earnings and revised their forecasts for the remainder of the year due to weakening corporate demand. At the start of the year, PwC expected RevPAR to grow by 5.5 percent, and major hoteliers agreed with the forecast. Now, Hilton projects year-over-year growth between two and four percent, and Marriott expects three percent growth.

“Obviously, the strength of the economy is the biggest question,” Arne Sorenson, Marriott’s CEO, said on Marriott’s earnings call. “As we guided a quarter ago, we had an overly rosy view about the strength of GSP in the United States.” The convention and conference industry continues to support the health of hotels, as Sorenson cited group business as one of the promising pieces of Marriott’s quarterly performance.

What Lies Ahead?

The hotel industry has been on an upward swing since late 2009 with consistent growth in occupancy rates and RevPAR, but it appears that the tide may be turning on the seller’s market. In May, financial experts at Bank of America downgraded shares of Hilton, Hyatt and Hersha Hospitality Trust. As the European Union sifts through the real impact of Brexit and US investors brace for a potential slowdown between now and November, hoteliers may continue to see sluggish growth rates.

How do you feel about the future of hotel rates? If you’re a meeting planner, have you noticed any additional negotiation power in your corner in your recent contract discussions? Go to Catalyst to share your insights.

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