I moderated a panel on supply and pipeline trends at last week’s Asian American Hotel Owners Association annual conference, and audience opinions provided some valuable counterpoints to those of the speakers.
Last week, I moderated a panel on hotel supply and pipeline trends in the U.S. at the Asian American Hotel Owners Association annual conference, in San Antonio and the attendees gave plenty of feedback.
When I moderate panels, I like to first ask the audience a couple questions to get an idea of what they want to hear from the speakers. So in this instance, I asked the people in attendance at the panel discussion—most if not all were hotel owners and/or operators—a couple questions, and my panelist Mark Woodworth from CBRE Hotels’ Americas Research asked a couple as well:
- Are your hotels located in or outside the top 25 markets? Overwhelmingly, the attendees have hotels located outside Top 25 markets, and most sit in the segment range of economy to upper midscale.
- Are you in the process of buying/selling/looking to buy? Strong “yes” responses to this question came in.
- Are you worried about supply? I’ll give you the answer to this one in a minute.
- Is the current hotel supply scenario ‘normal?’ I’m going to make you wait for this answer too.
First off, let me say that I trust the audience at AAHOA like I trust no other panel audience when it comes to being honest with feedback. So many times I moderate panels and the audience is like a sea of dead fish (I hope that’s not a reflection of my moderating skills!). Not so at AAHOA—these owners are highly invested in what speakers have to say, and they’ll call them out if they don’t agree.
I consider the AAHOA audience from last week a pretty typical profile of U.S. hotel owner/operators: Most are in charge of properties outside top 25 markets, in typical suburban and/or airport markets, in secondary and even tertiary markets. Most are interested in buying or selling right now, too. Most sit in the economy to upper midscale segment range.
And now their responses to the last two questions: Yes, they are worried about supply in their corners of the markets. And no, most of them don’t like to consider the current hotel supply scenario normal.
I think the audience response about supply concerns is a big red flag right now. Earlier this month my STR colleague Jan Freitag wrote an article for HNN: “Analysis of US metrics reveals 5 troubling trends.”
He pointed out February’s 2.6% supply increase in top 25 markets as a worrying statistic, and rightfully so, despite the accompanying strong demand. We’ve heard rumblings for a while now about supply concerns in these markets, and we know there are places that can absorb that supply, and other places that can’t do that as well.
But to hear from owner/operators about supply concerns in markets outside the top 25 places is equally troubling, because as they told the panel, it can be much tougher to absorb new supply in their markets. To that point, check out Freitag’s data showing that more submarkets are reporting negative revenue per available room.
As for the audience response to Woodworth’s question about whether we’re in a “new normal:” A majority of attendees didn’t like that idea one bit—they cited rising interest rates as well as government and regulatory uncertainty as reasons.
“Nobody predicted the crash last time,” one audience member said. “Is anybody realistic, or is everyone just optimistic?”
(At this point I probably should have directed this audience member to the latest Joel Ross column, but I let the panelists take this one).
I thought Russ Rivard, managing director and senior partner with HVS Dallas and one of my panelists, had a good response to this. He said in part that he wouldn’t necessarily say he’s optimistic, but that we are in what’s considered a “normal” situation right now: Interest rates are rising, but at very small increments. And it can be utterly impossible to predict black swan events.
The panel agreed that while the current extended recovery (and RevPAR growth period) might be atypical, it doesn’t necessarily mean that operators should live every day anticipating the other shoe to drop and everything to just go right to hell in a handbasket. In other words, we’re in a new normal.
Rivard and the panel represented very well the macro U.S. industry perspective. And the audience members represented very well the micro perspective.
And maybe the twain never shall meet. But in the meantime, it’s beneficial to consider perspective from all sides.
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