LOS ANGELES—Any number of global factors—from viruses to geopolitical churn—are up on the lodging industry’s “worry board,” according to experts and attendees alike at this year’s annual Americas Lodging Investment Summit, which yesterday kicked off here at the Microsoft Theater at L.A Live. While talk of “change” could be heard among some of the record 3,025 movers and shakers gathered in and around the event’s traditional home base, the JW Marriott, how soon and by how much any potential profit-crunchers might impact the positive run the domestic hotel industry has been enjoying for more than a decade remained open to debate.
A sea change of sorts for the summit itself came as Jeff Higley, president of The BHN Group, which hosts the event along with the American Hotel & Lodging Association, took over conference duties from ALIS founder and former chairman Jim Burba, who sat as a second-row observer after stepping down from his post last year at BHN (where he remains an advisor) as the opening plenary session unwound on day one.
Following a video presentation of key industry events over the past decade—complete with a laser light show—Higley indicated to the crowd gathered for the three-day event dubbed “On the Edge of Our Seats!,” that the year ahead would see change.
He noted a pre-ALIS survey of delegates pointed toward an expectation of more growth along with “more brands, more development, more acquisitions. But uncertainty takes the cake. There’s a lot of uncertainty, a lot of change going on in the industry.” He added 2020 would be colored by “disruption” and “innovation” following a decade marked by robustness, particularly around growth and profitability. “Those two [words] define change in a way that nothing else can and they really indicate what we’re on the cusp of as 2020 unfolds,” he said.
As to how the economy might perform given these aspects, overall compared to 2019, a majority of survey respondents—58 percent—felt the economy would be flat, while 32 percent felt it would be up. “The doubters are there, 10 percent, but it’s good to see that most people are still very optimistic about what’s going to happen in the economy,” said Higley.
2020 Outlook
A panel entitled “The Economist Outlook—How Close to the Edge are We?” gave a wider view of what might be in store in 2020. Journalist Simon Hobbs, financial advisor with California Financial Partners, moderated the session that presented views from Richard Barkham, chief global economist/head of research of CBRE, and JLL chief economist Ryan Severino. Key among the discussion points were the need to monitor global shifts and events as well as the potential effect of the upcoming U.S. presidential election, along with emerging disrupters such as the current coronavirus crisis.
“In answer to the question, how close to the edge are we, I would say the stock market thinks we’re not. That doesn’t mean to say that they’re correct,” offered Hobbs.
From a “big picture” perspective, Barkham noted, “We are in a very extended cycle that does not look like there’s an end to it. I think that’s largely because of the absence of inflation. The absence of inflation is good for ordinary Americans ... but it creates problems for the supply side of the economy. We’ve got new supply to absorb and not much pricing power coming out of it. There are structural shifts in the economy and business models are changing and rendering old business models obsolete. And, of course, that absence of inflation and that general lowness of interest rates pushes the stock market to all-time highs, and that makes the economy vulnerable, I think, to random shocks out of nowhere.”
For his part, Severino tended to concur. “I think the economy’s in a good—maybe not great—place as far as underlying momentum goes. But to [the] point about asset classes, valuations, etc., some of it is expectations versus reality. If you look at the stock market, it’s clearly expecting things to continue operating pretty well. And that’s not necessarily saying that they won’t but history shows when you end up at valuations like this it’s usually a harbinger that returns will not be as good going forward. So, maybe it’s not necessarily a case of things deteriorating so much as maybe expectations are somewhat elevated relative to what reality can actually produce.”
Critical Issues
Chip Rogers, president/CEO of the AH&LA, stressed that the industry still needs to have “a louder voice” and also needs “to speak with a very unified voice” when it comes to advocacy and dealing with critical issues such as labor. “We need more people and we need more training of those people. Right now there’s an estimated 800,000 openings in our industry, and now that we’ve had unemployment under 4 percent for 22 consecutive months, this is a problem that is probably not going to disappear soon,” said Rogers.
He emphasized, however, dealing with the scourge of human trafficking, which often finds a home in hotels, is “far more important than apprenticeship, RevPAR, occupancy...we are in a unique position as an industry to help eliminate a crime that should never exist in America in the 21st century; a crime that impacts 40 million people a year.” He urged attendees to get on board with the association’s “No Room for Trafficking” campaign to wipe out the criminal activity within lodging facilities through training of associates to bring awareness of the signs of its existence within properties and next steps in working with law enforcement.