Lodging industry's confidence belied by slowing growth numbers


According to the September 2017 edition of Hotel Horizons, CBRE Hotels’ Americas Research is forecasting continued growth for the hotel industry in 2018, although at a slower pace. Occupancy is expected to increase just 0.1 percent with a 2.3 percent jump in ADR and RevPAR gains at 2.4 percent. CBRE attributes the deceleration in occupancy to the influx of new supply in 60 major markets.

But despite geopolitical instability, global economic uncertainty, sluggish wage growth and increases in hotel operating expenses, hoteliers we spoke to remain optimistic headed into the new year.

Michael Dominguez, SVP and chief sales officer for MGM Resorts, for one. He is confident Las Vegas will thrive in 2018, for myriad reasons. “After feeling some impact on international traffic due to the strength of the dollar from mid-2016 to April 2017, the dollar is now weakening and that’s positive for inbound international travel since the U.S. had become very expensive over a very short period of time,” he said. 

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New York is also benefiting from a weaker U.S. dollar, which fell to a near two-year low in July, though has edged up since. Boris Guerov, GM at the Millennium Hilton New York Downtown, monitors currency fluctuation, specifically the euro and British pound, but Guerov is even more concerned with competition; namely, the 15 new hotels slated to open in 2018 south of Chambers Street, in downtown Manhattan. “It’s always a wait-and-see scenario and no one can be exact in their predictions, but I expect RevPAR to be flat or to decrease slightly, in line with industry reports,” he said. “Although there may be a slight increase in demand, it will be absorbed by all of this new inventory.” 

On the international front, currency isn’t the only concern. The impact of Hurricanes Irma and Maria on certain destinations, particularly in the Caribbean, may cause some leisure and incentive business to shift, according to Dominguez. But Scott Austin, regional VP and GM at the Embassy Suites Houston Downtown, said the post-Harvey situation in Texas’ largest city is far more stable, claiming the city hasn’t lost any convention business following the hurricane, which he described as a "short-term disruption and devastating to the city’s housing market as well as small business owners."

He added that Houston has returned to business as usual with a strong 2018 convention calendar that has been helped by the city’s efforts to diversify beyond its struggling energy sector. “We’re located adjacent to the Marriott Marquis Houston, which was a $175-million investment that’s also been a big boost for our demand. It’s helped to position Houston as a destination that isn’t just for conventions,” Austin said. “Visit Houston has also embraced the city’s diversity and built the brand around Houston as the culinary and cultural capital of the south and we’ve seen a big increase in residents moving to the city’s core.” 

In Scottsdale, which has benefited from three consecutive years of national sporting events, including the Super Bowl, the National College Football Championship and the NCAA Final Four, will go without a headlining athletic event in 2018, something Ken McKenzie, GM at The Scottsdale Resort at McCormick Ranch, believes will help draw more meetings and convention business to the destination and, he hopes, his property. “Most of the analysts have projected modest growth in RevPAR for this market–in the low single digits—and most of the hoteliers here that I’ve spoken with agree,” he said. “Scottsdale and the Metro Phoenix markets are large group and transient destinations, especially during spring training and winter months. So we’re positive for 2018.” 

After three record years of group business for MGM Resorts’ Las Vegas properties, Dominguez sees no signs of that trend slowing down, particularly with an additional 200,000 square feet of space set for the Aria convention center and the addition of the new Park MGM, a $500-million-plus rehab of the former Monte Carlo, being done in partnership with the Sydell Group. The project is slated to open in late 2018, complete with an Ideation Lab, created for strategic planning and budgeting meetings for an average of 22 high-level executives. “This will be a very unique concept for MGM and for the Strip because it’s such a high-tech, high-touch concept,” he said. (Dominguez is also touting another Las Vegas addition as a demand generator: the inaugural season of the NHL’s newest team, the Vegas Golden Knights.)

At The Scottsdale Resort, McKenzie expects the property will continue to reap the benefits of a $10-million renovation that was completed in 2015. The addition of more outdoor event space has already helped to increase the resort’s weddings business by more than 300 percent and McKenzie expects still more weddings in 2018.

“Barring any type of world conflict, I think this market is well positioned for continued moderate growth next year,” he said.