We’ve taken the last few days to take stock of all that went down at the 46th NYU International Hospitality Industry Investment Conference (NYUIHIIC) 2024. Here are our top trends to watch.
Short-Term Complications …
The signs at the end of 2023 pointed to a likely fall in inflation, which many predicted would lead to cuts in interest rates… of course this hasn’t happened. Consequently, debt is still expensive leading to a more muted transaction environment.
- “In the capital markets, there are some adjustments in pricing, but not a lot. The cost of financing is also one of the biggest challenges, particularly for repositionings, the types of deals we go after,” said Tim Abram, managing director, Starwood Capital Group.
- “We are dealing with some owners that actually have to sell good hotels to stop others from being defaulted or being taking back by the bank. It’s going to require interest rates to come down and the reversal of the office crisis. It’s hard to develop new buildings, and although conversions are possible, they are very expensive to do,” said Bill Fortier, senior vice president, development Americas, Hilton
… But Long-Term Looks Good
You know what happens when things are looking a little bit dicey in the shirt-term, CEOs and execs pivot to talking about the bigger picture. This was certainly the case at NYU. The macro backdrop isn’t a rosy one with inflation sticking around (see above), two major conflicts and an upcoming U.S. presidential election. But the prospects for global tourism over the next decade are very good thanks to growing middle class spending in places like India and China.
- “Globally, the middle class has doubled in the past two decades and will probably double again. Revpar premiums are bigger outside the US than in the US. We are not the only ones that have figured that out, but if we can win a bigger piece of the pie it will work in our favor, “ Kevin Jacobs, chief financial officer and president, global development at Hilton
- “We used to have 70 percent international and 30 percent domestic occupancy, but now it’s the inverse and rates are moving up 30 percent year on year. We place India 15 years behind China - we think it will follow the same trajectory,”
U.S. Still the Key Capital Market
With all this focus on opportunities in Asia, it’d be easy to forget the importance of the U.S., particularly as a source of finance. It’s the center of the money universe and when something happens on Wall Street it tends to ripple outwards.
- “The U.S. capital markets are the preeminent capital markets in the world, the leading capital markets in the world and not by a little by a lot. And so that creates a significant amount of activity that's up that's operates here in the United States” said David Solomon, CEO of Goldman Sachs.
- “Today I came back to realising that the structural advantages we have in the U.S. are so great. I still think this is by far the best market to invest in in the world, it’s the deepest and most robust,” said Eric Resnick, CEO of KSL Capital Partners
Experiential Arms Race
It’s not just about the room anymore, even if it is a very nice one. There’s so much competition out there that hotels focusing on the upscale and luxury market need to find new ways to differentiate. What can you offer that your competitors can’t?
- “People are living longer and wanting to have fun and so that's been a great opportunity for us,” said John Cohlan, CEO of Margaritaville.
Reduce Friction
Anyone who’s tried to enter the U.S. recently, knows how difficult it can be. Crumbling airports, huge immigration queues and limited public transport offerings are a surefire way to turn off tourists. At the start of the year a study by Euromonitor International, found that the U.S. was placed 17th out of the top 18 travel market in terms of global competitiveness.
- “One of the key challenges in the entire infrastructure is capacity, whether it's federal resources, personnel wise, terminal access and size, air carrier routes and so forth,” said Kevin MacAleenan, Pangiam, former head of Department of Homeland Security.
- “We don't have the national level of coordination that countries like China and Canada have. We have the Department of Homeland Security, Department of Commerce etch somehow involved with travel but we lack that leadership to put in place a strategy once and for all to really increase that share. Other countries are running a very coordinated effort to make themselves more competitive. We have these loose ends all over the place without that type of national leadership,” said Geoff Freeman, chief executive officer of the U.S. Travel Association