How global markets are negatively impacting hospitality

A range of factors are causing hotel experts to make worrisome predictions for the lodging industry over the next two years. 

A report from Fitch Ratings is predicting that hotel occupancy will fall in 2016, which means that RevPAR could slow significantly in 2017 and even go negative in 2018. The last time RevPAR flipped negative was during the lowest point of the Global Financial Crisis in 2009, when it dropped 16.6 percent.

The report blames the “surge in global terrorist attacks, fears about the Zika virus, weak corporate earnings growth,” the strong U.S. dollar and the Brexit for a decline in travel that is affecting the lodging industry. "Indeed, many companies have enacted (nonessential) travel restrictions in response to weakening business trends. Group demand is leading the industry; however, anecdotal evidence suggests that future booking pace has slowed."


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Notably, the report comes just as lodging stocks are spiking. Hotel real estate investment trusts have been generating total returns, including dividends, of 5.7 percent in June and 10.2 percent in July. Year-to-date, they're up 15.4 percent, outpacing the S&P 500's 6.7 percent return and Nasdaq's 4.4 percent return.

As such, the report suggests that investors may want to start cashing out of their hotel-related stocks.

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