The results of the Hospitality Asset Managers Association’s (HAMA) latest bi-annual survey of asset managers’ thoughts, experiences and forecasts for the upcoming year shows that its members are taking a somewhat optimistic outlook.
“Around the horn, the good news was that on the industry outlook for recovery, more people think in 2023 than in 2024,” said Larry Trabulsi, CHAM, EVP at CHMWarnick and current HAMA president, in a presentation of the results to the media. “That could be more of an indicator of the sky’s a little bit sunnier than we thought, still a lot of work through to get there. But that being said, some of the [questions] about distress and doom as we call them, there is still 5-10% of respondents indicating there is still a lot of distress under the covers if you will. It will come to the surface and hopefully, market recoveries will get there fast enough so folks can restructure and reorganize versus a distressed scenario, but even as things have gotten better, some of the numbers on the distress were surprising to me.”
The optimism was surprising to Chad Sorensen, CHAM, managing director/COO, CHMWarnick and HAMA marketing chair. “As we go through the [questions], there continue to be issues that we need to work through, but generally speaking, and all things considered, the environment that we have been in and what we have just gone through, it is a pretty optimistic result.”
The survey found that nearly 30% of respondents are contemplating brand or management changes as part of their recovery strategy, with approximately 5% believing they would change brands and 10% foreseeing changing management companies. Roughly 15% believe they would change both.
Sorensen said the reason so many respondents indicated that they might make a change is that ownership groups are resetting their investment strategies, noting, “To reset that strategy comes a bigger initiative of looking at all of these hotels and [asking]: Is the right brand on the hotel? Is the right management company? Is the right brand versus third-party structure in place? This has presented an opportunity for ownership groups to really try to figure out what the best positioning and structure looks like moving forward.”
Nearly 80% of respondents revealed that they are actively pursuing acquisitions. “This is indicative of the amount of capital that is on the sidelines,” he said. “We are seeing in a lot of markets when something of quality comes to market, there are discounts to pre-COVID levels, but the amount of capital that is available is helping to prop up interest and therefore propping up some of the value.”
On average, in urban markets for full-service and luxury properties, nearly 45% of those surveyed anticipated acquisition price discounts of 11%-20%. While one respondent believed discounts could reach 41% or more off pre-pandemic pricing, approximately 15% felt discounts would be as low as zero-11%.
Half of HAMA members (50%) believe RevPAR will return to 2019 levels by 2023. Not quite 10% believe it will occur as early as 2022, while approximately 37% believed it would happen in 2024. Predictions for 2025 and 2026 came in at 3% and 1%, respectively.
When it comes to what concerns respondents have, they include labor availability (75%), demand (60%) and labor costs (55%). “The labor piece is very interesting, when you think about pre-COVID when we were running at [around] 80% occupancy, we were talking about not having any labor, and now we are running 30-40% occupancy and we still have no labor,” said Trabulsi.