CBRE Hotels Research specializes in translating national and local economic conditions into measures of hospitality market and property-level financial performance now and into the future.
Annual changes in U.S. hotel utility costs and in the Consumer Price Index (CPI), or inflation, have historically proven to be strongly correlated. As of August 2022, CBRE is forecasting CPI growth to be 7.7 percent in 2022, followed by another 3.6 percent in 2023. Since inflation has averaged just 2.2 percent since 2000, these inflation projections have hoteliers concerned about operating costs. Given that rising energy costs are a significant driver of the current rise in CPI, hotel managers are especially worried about utility department expenses.
While the lodging industry is recovering from impacts of the COVID-19 pandemic, this twelfth annual HVS Lodging Tax Study quantifies the revenue impact of the pandemic over the past year. An analysis of 25 major US hotel markets shows that overall revenues have recovered to 2019 levels, but markets with high levels of leisure demand are faring better than those without. The lag in collections of lodging taxes will prolong the impact of the pandemic state and local government collection of the taxes. The report also provides historical data on tax rates and the collection and distribution of revenue from lodging taxes levied in all 50 States and the 150 largest US cities.
The halls of the JW Marriott Desert Ridge were buzzing this week as thousands descended upon the Phoenix resort for this week’s Lodging Conference. If you couldn’t make it to the event, here’s a quick recap of what you missed.
In Part 1 of this series, I highlighted that hotel property investors transact to acquire both real estate and the operating businesses with their varying sets of revenues and expenses. This institutional arrangement is unlike those for most other commercial real estate investments in which the business owners make fixed rental payments to property owners while expenses are mostly variable. Hotel investments therefore come with counteracting exposures to inflation of operating revenues and expenses that may neutralize inflation impacts on profits (i.e., net operating cash flows). The statistical results reported in Part 1 suggest that hotel profits do not adjust to inflation. Over the period of 1946-2020 inflation positively influenced both total revenues and total operating expenses to the extent that they offset one another.
Bonus Depreciation is fading away over the next 5 years. With the help of the IRS Section 179 Deduction and still powerful Bonus Depreciation, lodging Owners can save thousands of dollars in federal income tax savings in 2022 and beyond.
The recent price surge for many goods and services in the U.S. raises the prospect for an extended period of persistent high inflation. Conventional measures of inflation track either specific sets of prices that consumers pay, notably the Consumer Price Index (CPI), or for economywide spending - Personal Consumption Expenditures (PCE).
On December 31, 2021, the constant maturity, 10-year U.S. Treasury note (the 10-year) stood at 1.52 percent. The 10-year now hovers around 3.0 percent and the prospects for higher rates appear good. During the data period for the analysis presented below, the 10-year ranged from 0.65 percent to 6.70 percent and last exceeded 5.0 percent in 2006. A concern among commercial real estate investors (especially hotel investors because of the high sensitivity to macroeconomic conditions) is a rate-driven economic slowdown that threatens property income growth. Given the linkages across capital market rates, investors are concerned about the possible upward movement in hotel capitalization rates (cap rates) promoted by increasing 10-year rates. This blog addresses the sensitivity of hotel cap rates to changes in the 10-year.
According to the March 2022 edition of CBRE’s Hotel Horizons® national forecast report, the total revenue for a typical U.S. hotel is not expected to return to pre-COVID 2019 nominal dollars until 2023. Accordingly, hotel owners and operators continue to seek ways to control expenses.
Hunter Hotel Advisors sponsored their annual hotel investment conference March 22-24, 2022, at the Atlanta Marriott Marques, attended by 1,726 hotel industry participants. The first Hunter conference in the late 1980s attracted 100 participants from almost entirely the Southeast and Atlanta at a less elaborate airport hotel setting. This year’s event had the aura of a national conference such as NYU and ALIS but retained the intimacy of earlier conferences and a distinct regional flavor of the Southeast U.S.
COVID-19 has been devastating for the hospitality industry. Hotel occupancy rates are still well below normal. While some lenders are still granting relief to borrowers, lenders increasingly have been foreclosing on properties.
Given the significant traction in distribution of the COVID-19 vaccines throughout the United States and general international travel restrictions, leisure travel has begun to recover in 2021 and is expected to continue increasing, with Americans seeking so-called “revenge travel” to a domestic getaway. Business travel is also beginning to show signs of recovery, and some group business related to conference attendance is returning.
Hotels Owners Interested in Interest To analyze the impact that declining EBITDA levels had on the ability of hotel owners to pay their interest expense, CBRE studied a sample of 1,121 hotels that reported interest payments in their operating statements for the years 2019 and 2020.
Hotel real estate investors need to measure both the absolute and relative financial performance of their properties. A 10% annual return may appear solid unless a collection of comparable investments earned 15%. Risk-adjusted returns measured against the appropriate index provide a way to assess managers’ abilities to generate excess returns. Measures of investment return come in many flavors.
See how JMBM’s Global Hospitality Group® can help you.Click here for the latest articles on EB-5 Financing here for C-PACE Financing.
PACE financing guidelines are finally available for New York City, and while the program has not officially launched yet, hotel owners and developers in the area should start planning how to use these loans to retrofit their properties. My Partner David Sudeck discusses the program requirements, below.
My hometown is St Andrews, New Brunswick in eastern Canada. The town overlooks Passamaquoddy Bay and to the south we are flanked by the great state of Maine. Every year in this part of the world the US governors and the Canadian provincial premiers get together for bilateral talks, some good food, and fun. This story is about one of those meetings, The Algonquin Hotel, and how I met our then Premier, Richard Hatfield who is partially responsible for my hotel career.
The once-in-a-century pandemic has caused hoteliers to endure a firestorm that decimated the hotel and leisure industries.
Hotel finance lawyer: PACE Financing is now mainstream
The COVID-19 crisis consumed the United States for approximately three-quarters of the past year. In December 2020, the U.S. Food and Drug Administration issued emergency use authorization for the Pfizer-BioNTech COVID-19 vaccine.[1] The development and distribution of an effective COVID-19 vaccine, alongside other public health measures, should allow us to combat the health effects of the global pandemic. With certainty coalescing around the health solutions to the pandemic, attention must turn to economic solutions.