Shaky Economy and Travel Slowdown Hit Hospitality Companies
This year, revenue per available room (RevPAR) has increased by only 0.9%, with several hotel operators reporting declines.
Major hotel chains are struggling due to consumer economic concerns and a drop in international tourism, caused in part by government-mandated air traffic reductions at the country’s largest airports. Midtier hotel chains, popular with much of the American middle class, are experiencing flat or declining RevPAR, increasing pressure as distressed loans rise and new development slows down.
“Everything is softer except the very high end. Government travel is softer, international inbound is softer, there’s a little bit of business hesitancy, and a broader consumer who is much more price-aware,” said Baird senior research analyst Michael Bellisario. “The middle of the market feels that the most.”
The year was expected to see a return to near-prepandemic conditions, but that recovery has not materialized. For the first nine months, RevPAR was mostly flat, with room rates rising just 0.9%, according to Jan Freitag, national director of hospitality analytics at CoStar.
“From an industry perspective, that is worrisome, because you want to grow room rates over the level of inflation. Because as everything gets more expensive, you want to drive your top line more than your cost,” Freitag stated.
Summary
The hospitality sector faces ongoing challenges from economic uncertainty and reduced travel, with little growth in room revenues despite expectations of recovery.