Hotels across the globe continue to navigate an uneven travel recovery, labor shortages, inflation, and rising mortgage rates - keeping hotel owners and operators on high alert. Budget season has started, and initial budget discussions are conservative, but still showing some overall revenue growth.
RevPAR (revenue per available room) started the year exceeding expectations driven by ADR (average daily rate) but this is changing. RevPAR has been missing expectations for about four months and all major forecasters - CBRE, along with STR, PWC, and LARC, have all lowered our forecasts as a result. Moreover, RevPAR growth has been unable to outpace the labor and overall cost-rising environment challenging the achievement of budgeted profit margins. Here is where the influence of savvy asset managers is making a difference by steering the property teams to be creative and proactive to increase market share, enforcing disciplined labor management processes, building zero-base cost structures by department, and providing a test of reasonableness when it comes to prioritizing spending and putting in place contingency plans without impacting the guest experience.
However, it is not all about cost-cutting. Investing in marketing and sales initiatives and measuring their effectiveness is paramount to the financial health of every property's next 12- and 18-month performance. Keeping marketing and cluster sales teams accountable for achieving sales goals, ensuring the right pricing strategy, and attending to every layer of the segmentation pyramid will make or break 2024 performance.
The deferred capex discussion continues, and PIP negotiations are a top priority in light of the interest rate environment, declining guest satisfaction, margin headwinds, and waning RevPARs.
Economic woes and uneven recovery patterns may be causing headwinds for the industry. Still, a muted supply pipeline is expected to maintain or continue to drive rates up. In contrast, the return of international inbound tourism, the recovery of business travel, and group attendance combined with the reliance on leisure travel are expected to continue to fuel occupancy recovery in 2024.
Asset management represents the active voice of ownership by communicating stakeholders' goals and objectives to the operators and keeping management accountable. Budget season is here, and there is no better time to articulate owners' expectations for 2024 clearly. Let's remember that operators are focusing on the daily on-property operations, and brands are focusing on increasing their footprint, leaving asset managers to focus on optimizing the owner's bottom line and maximizing the value of the real estate.
It is crucial to remain alert to the drivers of global hotel performance, and it is even more crucial to leverage global information and best practices to anticipate and proactively act to impactful shifts in the industry landscape. Despite the current uncertainty, operators and owners alike have a positive outlook for the global hotel sector.