The hotel industry’s hot streak

Future. The pandemic hit hotels especially hard, but now they’re making a comeback in equal measure. Rising wages, pandemic savings, and market conditions have made hotels feasible expenses or investments for the moment– but is the boom here to stay?

Say goodbye to staycations
In the first three months of 2022, hotel sales surpassed $12.5 billion. According to the Wall Street Journal, that’s a record since 2016.

• • The red-hot market has led to record acquisitions. For example, Xenia Hotels & Resorts, Inc. recently purchased the W Nashville hotel for $950,000/room in a $329 million deal.
  • One reason for the boom could be inflation. Everyone’s got to deal with rising labor costs, but the hotel industry can cope with general price inflation better than most businesses, thanks to its ability to set new prices for its rooms daily.
  • Likewise, sharply rising property values grew hotel value 18% YoY as of March. Their growth has outpaced that of hotel profits — but that mismatch actually augurs well for the industry’s future since analysts expect profits to catch up soon.

Hotels are recovering from their pandemic slump, but it’s worth pointing out that the industry’s prognosis is still worse than it was before the pandemic.

Yes, vacancy

Relocation fever and the broad shift to remote work has generally lowered the demand for temporary lodging. Rising prices and home mortgage rates could eventually reduce Americans’ disposable income, and rising interest rates could hurt hotel investment by improving bond yields, leading investors to pursue those instead.

Nevertheless, some hotels are trying to accommodate this shift in the nature of work by launching subscription services for long-distance commuters and hybrid workers that would guarantee members one night’s stay per month in a hotel. Keep it short and sweet.