Industry NewsFitch Ratings: Lodging and Leisure on Solid Footing

Fitch Ratings: Lodging and Leisure on Solid Footing

NEW YORK—A healthy U.S. consumer bodes well in the near term for the U.S. lodging and leisure sectors, according to Fitch Ratings.

“With consumer confidence, employment, and household balance sheets at or near the strongest levels in 15 years, lodging and leisure sector fundamentals are on solid near-term footing,” says Stephen Boyd, senior director, U.S. Corporates. “Longer term, consumer preferences for experiences rather than physical goods will benefit the sector, specifically hospitality and travel-oriented companies.”

Personal income growth will be an important driver of discretionary spending, making it a key metric to watch.

Fitch expects U.S. lodging RevPAR will grow 1 percent to 2 percent in 2017, driven mostly by leisure travel and group demand as corporate travel remains weak.

Solid leisure travel is also benefitting online travel agencies (OTAs), the cruise industry and theme park operators.

Timeshare companies will continue to face pressure from higher new-owner sales, which have lower margins and more financing.

A notable outlier is the U.S. golf industry where demand (i.e. rounds played) is in secular decline due to unfavorable demographics and competition from alternative leisure pursuits that are more affordable and less time consuming. Innovations such as TopGolf may not translate into long-term growth in traditional golf participation due to structurally different approaches to the game.

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