Highlights from the New York University Investment Conference

David Sangrey, MAI, CPA, ISHC had the opportunity to attend the International Investment Conference in the New York Hospitality Industry on June 6-7 at the New York Marriott Marquis. Here are some key highlights of the conference.

ADR growth: ADR growth in 2022 has exceeded everyone’s forecasts for the industry. Actual ADRs are above US 2019 levels in the last 10 months, although inflation-adjusted ADRs return to 2019 levels in March 2022. In some markets, such as Florida Keys or Northern New England, ADR growth was well above the nation. Other urban and commercial markets have seen much lower growth in ADR. STR predicts that ADR will rise to $ 145 in 2022 and $ 155 in 2024 for the United States as a whole, from $ 125 in 2021.

Growth in demand: Demand for rooms has risen to 95% of 2019 levels since last summer. In certain months it is equal to the levels of 2019. The biggest difference in demand remains during the days of business travel, as demand over the weekend exceeds the levels of 2019. Of course, the growth of demand is not equal across the country. Some of the top 25 markets, including leisure destinations such as Tampa, Florida or Nashville, Tennessee, have fully recovered demand, while many urban markets are well below 2019 levels. New supply growth continues, but rising construction costs and chain problems for supplies helped to shrink the pipeline, which is a real benefit for existing open hotels. STR forecasts total national employment of 63.4% in 2022, rising to 66.4% in 2024.

Staff: The challenges of staffing and hiring staff for hotels and corporate offices have been extensively discussed in numerous sessions of the conference. The CEO of Omni Hotels pointed out that the hotel brand recruits employees outside their corporate offices for all their properties. They currently have approximately 3,000 jobs and employ about 700 people each week. Other executives pointed out that most of their hotels are rented at levels below optimal requirements. To address staff shortages, some presenters said they were exploring ways to push through the fun and social aspects of hospitality.

Delays in construction: Challenges to public procurement related to new construction have been discussed in many panels, as properties now require longer lead times and have to pay higher prices for materials to build new hotels. Problems such as the lack of parts for making windows and obtaining fabrics from China were cited as examples of delays in scheduled dates for opening or renovating properties.

Hotel values: After a sharp decline in hotel values ​​in 2020 and a significant increase in 2021, hotel values ​​are expected to show a moderate increase over the next two years. These gains will be linked to improved hotel productivity levels and increased costs of building new construction properties.

Base for future financial forecasts: In the last two years, appraisers, consultants, insurers and other financial analysts have used 2019 as a base year for financial analysis for hotels. Due to the improved performance projected in 2022, presenters said that 2022 will be the new baseline for future projects starting in 2023. As the ADR is expected to exceed pre-pandemic levels next year, these rates will be better used as a baseline for future forecasts. Even if a recession occurs, the tourism industry is not expected to be hit so hard due to the severe effects of the pandemic on the tourism industry and the level of accumulated demand.

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