The hotel recovery continues!
New studies show that, despite downward pressure on economic growth, the hotel industry continues its upward trend.
The Inflation Fighter
With positive GDP growth forecasted and inflation predicted to stay high, ADR, the Average Daily Revenue generated from an occupied room for a day, is expected to outperform inflation in the near term. Hotels have a unique ability to adjust room rates daily, even hourly, to adjust for changes in costs and demand, giving us the ability to stay on top of sweeping changes in the economy. Considering we are in the travel comeback of 2022, it makes sense that we are seeing trends meet, and even surpass, pre-pandemic levels. Despite the Omicron variant, 2022 Q1 RevPAR is up 61% from a year earlier. RevPAR growth was driven by a 39% increase in ADR and a 16% increase in occupancy.
These rising rates demonstrate that travelers aren’t terribly price-sensitive. Most importantly, demand is expected to exceed GDP growth in the coming years, putting hotels in a prime position to profit. This puts us in an incredibly strong position, seeing as how we are still purchasing hotels at Covid-reduced prices, and if all goes according to plan, selling them in 3-5 years once the market fully recovers.
We are having a FREE webinar Thursday June 23rd 12PM EST / 9AM PST entitled “Pricing Power: How Hotels Fight Inflation.” Hotels, like all real estate over long periods of time, typically grow in value, making most commentators say that it is an inflation-fighting asset class. What puts Hotels in a class by themselves is Pricing Power, and Premium, national, name-brand business select hotels may just be the top of their class. Here we’ll be discussing how we leverage pricing power to consistently bring our investors so far, returns well above our 8% preferred return. And don’t forget we are aiming for substantial growth when we sell our properties.