U.S. Hotels State of the Union August 2023 Edition

Key Takeaways:

• Capital Markets

  Margins remain under pressure across all segments.
  Margins declined 2.7 percentage points in May. Subsequently, gross operating profit dollars for all hotels decreased by 2.5% year-over-year in May.
  
  
  U.S. loan origination was down again in July versus 2022.
  The pace of loan origination continued to slow in July to 5 from 19 a year ago as interest rates continued to rise. Hotel CMBS interest rates reached 9.4% in June, up from 8.5% a year ago.
  
  Full-service price per key declined while limited service increased.
  Year over year, full-service price per key dropped 18.4% in Q2 to $144,963 per key. Limited-service asset price per key rose 2.1% to $94,511.

  Current Trends

  June RevPAR declined 0.1%. on a 1.8% decline in occupancy.
  Chain-affiliated hotels outperformed increasing 1.6% year-over-year in June compared with a 4.8% decline for independent hotels.
  
  Outbound U.S. travelers outpaced inbound international visitors.
  Americans traveling to Europe and the Caribbean exceeded 2019 in June by 4.6% and 8.5%, respectively. Inbound international travel continued to lag at 73% of 2019.
  
  Brand.com demand has increased materially versus OTAs.
  Relative to 2019, Brand.com demand has increased 11.5% outpacing other booking channels including OTAs which were 1.8% below 2019 levels.

• Food for Thought

  Wage growth is outpacing inflation for the first time in two years.
  Wages grew 4.4% in June, outpacing the 3.1% growth in the consumer price index which could lead to increased bookings going forward.
  
  Excess savings are being spent but consumers still have money for now.
  Consumers have been spending excess savings accumulated during the pandemic, with $770 billion remaining. The personal savings rate was 4.3% in June, below the historical average of nearly 6.5%.
  
  Short-term rentals appear to be taking share from hotels.
  Hotel demand growth declined 1.5% in June while short-term rental demand rose 14.3%, suggesting that short-term rentals may be taking share from hotels.