If all good things must eventually come to an end, then the hotel industry should be exempt—for now. That was made clear during the International Hotel Investment Forum, the global investment conference in Berlin that is operated by Questex, the parent company of Hotel Management magazine.
I’m writing this column in the air, and if good vibes were fuel, this plane would have a full tank. Turns out, according to the some 2,400 delegates who packed the InterContinental Berlin, the hospitality industry cycle may be mature, but is by no means fully gray in the beard.
Look, I’m no pollyanna by any stretch; some may even accuse me of possessing a cynical streak. But I know this: you can’t argue with success, and that is exactly what the hospitality industry has been and can continue to be so.
2015 was a fantastic year. RevPAR globally was a thing of beauty—both Europe and the U.S. were above 6-percent RevPAR growth for the year—and transactions—an indicator of a healthy operating environment—hit all-time-high marks, too, with global transactions reportedly hitting $85 billion. There’s no where to go but down, right?
Exactly the wrong way to think—but success is almost always met with skepticism. Reporting the bad is a pervasive within media circles; it’s why the front page of the paper is often peppered with stories of gloom—hardship trumping mirth.
A good run, however, does not need to be fleeting. Oftentimes, the sequel is better. In many circles, The Godfather Part II is considered a better film than the original; Michael Jordan’s diabolical ’88-’89 season, when he averaged close to a triple-double, was followed up by a season where he averaged 33 points per game; and President Bill Clinton’s second-term approval rating was a full 11 percentage points higher than his first-term approval rating.
In your business, it’s all about extending the runway and, right now, further blacktop awaits. During IHIF, Hilton Worldwide CEO Chris Nassetta said there was still runway for operating fundamentals, and that investment is still at mid-cycle. He added that Hilton will be opening on average one hotel per week in Europe this year.
Meanwhile, Wyndham Hotel Group CEO Geoff Ballotti told me that they are looking for another great year in 2016 (and what CEO would ever utter an untruth?).
Most prognosticators say 2016 will be another positive year for RevPAR growth, above 5 percent. My advice is to stay focused on your core business and avoid making rash decisions because of some half-truth you hear. As we all know, hospitality is a local business, so do stay tuned into your market. Keep track on new supply coming in, what new businesses might be opening that could increase your corporate demand and, yes, if Airbnb is taking a dent out of your bookings.
We are all programmed to believe that greatness is followed by a steady decline. And though 2015 was a great year for the hospitality industry as a whole, there is no need to believe that 2016 can’t be just as good—provided you keep your head in the game. Steer clear of the self-fulfilling prophecy and remain vigilant. 2016 can be a box office smash.