Although no one knows exactly what 2017 has in store, Monty Bennett, founder and chairman of Ashford Group of Companies, has made a few predictions on how he expects the hospitality market will act over the year. Here is what he shared with LODGING:
Demand will outstrip supply.
“Most people believe that occupancy will be flat this coming year, with supply probably around two percent and demand matching it. However, I’m a little bit more optimistic in that we’ve been very surprised with how the market has responded post-election,” says Bennett. “Since Trump’s election, the market seems to be anticipating a mandatory regulatory rollback and other stimulus in the economy, which leads people to be more optimistic, spend more money and small businesses to be more optimistic. Optimism is at its highest level since 1980, and I think there’s a good chance demand could outstrip supply which would lead to positive growth in occupancy and average daily rates.”
Supply will peak at 2 percent.
“The availability of financing for existing properties, at least according to the Federal Reserve’s Senior Loan Officer Survey, seems to be holding stable. The banks aren’t tightening those loan terms and they aren’t loosening them either. However, according to the Fed’s survey, land and construction loans have been tightening. That may eventually change with the Trump administration and the recent uptick in optimism, but at this point, the banks have been tightening those loans considerably,” explains Bennett. “As a result, we may be seeing the peak of net new supply at 2 percent, which is fantastic. Typically, net new supply peaks at levels significantly higher than that, so while new supply is coming in, it’s nothing like the prior cycles, which is great news for existing hotel owners.”
Luxury hotels will be rated with higher performance.
“I think you’re going to see better performance from the luxury and higher end hotels. There’s less supply growth in luxury and upper upscale properties and in booming economies, the higher end usual does better.”
The biggest things to watch this year are the dollar and New York City.
“We need to closely watch the dollar. We expect the dollar to move up, which may cause some trouble in gateway markets where we have foreign travelers, but we think the overall economic growth will likely offset that effect. We are also paying close attention to New York City since Airbnb regulations could go into effect in 2017—which will hopefully take some inventory offline and encourage people to start staying in hotels again instead of other people’s flats.”
