NEW YORK—The further we get in the cycle, the more things stay the same. While occupancy is dipping, ADR is showing middling growth, supply is on rate trajectory higher than the historical average of 2 percent and there is wariness in the economy and political stage, there are no real signs right now that point to a significant threat to the hotel industry's ability to grow and sustain revenues.
This was the overall sentiment at the opening day of the NYU International Hospitality Industry Investment Conference, here at the Marriott Marquis.
“The political and economic climate in the country continues to evolve with uncertainty. That coupled with lower than expected pricing power during the first quarter led us to decrease our ADR growth projections,” said Amanda Hite, STR’s president and CEO. “Nonetheless, signs continue to point toward business as usual for this stage in the industry cycle. Accelerating supply growth is pressuring occupancy levels, but rate increases will continue to push overall RevPAR growth—albeit below the historical average.”
According to STR and Tourism Economics, for total-year 2017, the U.S. hotel industry is predicted to see a 0.3-percent decrease in occupancy to 65.3 percent, a 2.5-percent rise in average daily rate to US$127.13 and a 2.2-percent increase in revenue per available room to $82.98.
For 2018, the projections are a 0.2-percent decrease in occupancy to 65.1 percent but increases in ADR (+2.7 percent to $130.59) and RevPAR (+2.5 percent to $85.07).
Not unlike other hotel industry conferences, hotel companies came strapped with new brands to announce. What had already been rumored came to fruition when Wyndham Hotel Group officially announced its entry into the soft brand space, following a host of other global hotel companies, with Trademark Hotel Collection, which will target upper-midscale-and-above (3-star and 4-star) hotels. At launch, the brand's pipeline includes more than 50 hotels and interested owners of both existing hotels and new construction opportunities in top urban markets around the world. The collection becomes Wyndham Hotel Group's 19th hotel brand.
"The explosion of soft brands in the last several years has been focused on luxury and upscale hoteliers—with demand still growing at a rate of nearly 20 percent—leaving a market void for independent hoteliers in the upper-midscale segment, the largest segment accounting for 18 percent of rooms in the U.S.," said Chip Ohlsson, Wyndham Hotel Group's chief development officer. "Wyndham is the only hotel company positioned to champion upper-midscale-and-above independent hoteliers so they can compete in an ever-changing distribution environment with brand-backed support and guest recognition and loyalty."
Trump for Three
While Wyndham's announcement was not a shocker, three other brand declarations were.
Never shy from the press, Trump Hotels announced a new brand called American Idea, a line of midscale and lower-priced hotels that will debut in Mississippi. (President Trump bested Hillary Clinton by 18 percentage points in the state.) The idea for the concept actually came off the campaign trail as President Trump's sons saw a white space for a chain of hotels in smaller U.S. cities.
The brand is the third in the Trump portfolio joining luxury Trump Hotels and the upscale Scion brand.
According to The New York Times, Trump Hotels' business partner in Mississippi is a family-owned hotel company whose co-owner met Trump at a campaign event last summer and donated to his campaign.
Still, according to Trump Hotels CEO Eric Danziger, no political thought was put to the new brand. The company behind the first hotel in Mississippi, Chawla Hotels, owns 17 hotels in the region. And while the Trump-announced Scion brand has yet to open a hotel, expectations are that American Idea hotels could be faster to market since some will be repositionings of brands such as Comfort Inn and even Holiday Inns.
More in Midscale
Meanwhile, with no fanfare, IHG said it would be launching a new midscale brand, but a formal announcement won't be made until the company's conference later this month in Las Vegas.
While IHG is keeping the brand well guarded for now, Elie Maalouf, CEO of The Americas at IHG, let spill some details during a meeting with HOTEL MANAGEMENT. While he did not divulge a name or logo, he did say that the midscale brand would be tech enabled, designed for all and would target a guest segment "where demands aren't currently being met."
It's a bold statement in light of Hilton recently launching its own midscale brand Tru, which opened its first property last week in Oklahoma City and reportedly has 425 hotels in some stage of development.
According to Maalouf, the new IHG brand will be around $10 to $15 cheaper than a Holiday Inn Express and begin as a new-build-only product.
Last, Hard Rock Hotels is kicking out a new select-service brand called Reverb, which it unveiled to onlookers during a post-conference party at the Hard Rock in New York. Hard Rock filed for the Reverb trademark in 2015, according to records.
As Marco Roca, chief development officer at Hard Rock International, put it, the brand will basically be Hard Rock Light—the great musical experience the brand is known for, but at a lower price point. While no cities have yet been named, Roca said Hard Rock already has 50 deals in some stage.