|1) DELTA, DELTA, DELTA Investors noted “quiet” concern over the potential for an uptick in cases this fall/winter that could stall industry recovery of corporate and cause short-term group cancellations. |
2) LABOR A #1 topic. The view is hospitality wage pressure is permanent despite the expected decrease in unemployment benefits in September. Some top market owners reported non-union rates now outpacing union wages.
3) MARGINS Both owners and operators voiced concerns about the ability to return to 2018-2019 operating margins.
4) THE “COVID PREMIUM” The transaction market feels like it has evolved into a “pay to play” market – too much cash chasing too few deals. A lot of frustration on the buy-side with hotel pricing recovery far ahead of fundamentals in many markets. Sellers who could not cash out in 2019/Q1 2020 may get their price today.
5) SIMILAR INVESTMENT THESIS Most investors remain focused on leisure-driven assets due to greater certainty of performance in the near term, the lack of corporate and group recovery visibility and limited urban trades.
6) INFLATION Typically favorable for hotel rates. In addition to wages for operating personnel, construction and renovation costs continue to escalate as the hotel industry competes (currently) with warehouse and multifamily development for labor. Higher material and freight costs also pressure budgets as the supply chain issues and spike in fuel costs have not eased.