Lodging Conference 2023 Recap
The Lodging Conference in Phoenix is the world’s largest hospitality industry conference. Hotel owners and operators, representatives from hotel brands, architects, design firms, procurement firms, finance companies, GCs, FF&E manufacturers, and various other hospitality stakeholders and providers were all part of this year’s group of 2750 attendees.
The Innvision team attends to learn about the state of the hotel market and what may lie ahead, as well as to network with hoteliers and others within our industry. The connections we develop and renew are invaluable and the insights we gain help guide us as we move forward. In this blog, you will learn what we took away from this year’s Lodging Conference and how our clients will benefit.
Key Takeaways from the 2023 Lodging Conference
Here’s a short list of our key takeaways from the conference:
- Travel, including group business and events, continues to recover and normalize following the pandemic. The supply and demand fundamentals for hotels are currently in a good place.
- The hotel industry’s upward trajectory should continue, but 2024 could hinge on presidential election results, interest rates, oil prices, and the strength of the consumer. With a strong jobs market, the economy does not appear poised to fall into a recession. However, growth next year is expected to slow with occupancy at 1% and rates at 3% (Tourism Economics).
- Hotel sale transactions in 2023 have been down thanks to tighter credit and higher interest rates. Still, this number should rise significantly in 2024, especially if we see the Fed lower interest rates.
- Americans have traveled abroad in 2023 more than at any other point over the last three years. Inbound international travel to the US is still down but should increase in 2024.
- Chip Rogers and the voice of AHLA helped ensure that the per diem rate for government workers increased, which he said should add at least $300M in annual hotel revenue.
- The US hotel construction pipeline is up year-over-year from 621 projects to 660. Renovations and conversion projects are up 25% and should continue at that rate for the next three years or more (Lodging Econometrics). Extended stay brands and projects are growing faster than ever.
- A shortage of labor is the largest concern for American hotel owners and operators, who still have unfilled positions and are trying to develop creative ways to gain and retain employees.
- A growing concern is insurance premiums’ becoming a higher percentage of a hotel’s operating expenses in the wake of more devastating and costly natural disasters.
Trends to Watch
Our team heard discussion about these three concepts that we expect to see more of in the near future:
- Sustainability and lowering their carbon footprint is a key focus for many hotels. Travelers, including group and event planners, are increasingly selecting hotels based on their sustainability. Electric vehicle stations are becoming an important hotel amenity.
- Space maximization via the “open closet” concept is gaining traction within hotel guestroom designs. This is a better use of space and necessary as hotel rooms are getting smaller.
- Food and Beverage operations are gaining prominence within many hotels, who are repositioning themselves accordingly. With greater numbers of people still working remotely and spending more time in hotels, this space has become much more important to guests.
Message to Innvision Clients After the Lodging Conference
Thought leaders at the Lodging Conference suggested that hoteliers in today’s market must have a purposeful growth plan and be willing to reinvent themselves. Experienced developers warned that it will not be cheaper to build a hotel a year from now than it is today. Even if interest rates and inflation ease a bit, expecting labor costs to decrease is not reasonable. Raw material pricing for new construction could decrease slightly, but it is certainly not guaranteed and can be a big risk to hold out in hopes that will happen. Our team spoke with one gentleman planning to build a Home2 Suites by Hilton whose estimated construction cost had risen from $11 million in 2020 to $17 million today!
Regarding funding challenges, industry experts recommended that hoteliers build and maintain great relationships with their lenders, doing what they can to align with regional and local bankers. Also, don’t be afraid to challenge your insurance companies and their current vs. replacement value assessments, which factor heavily into annual premiums.
Finally, it was said repeatedly that thoughtful, timely planning is critical to a successful renovation or new build, and it is never too early to compile your project team. Schedule milestones from day one and modify them as needed. Things will change, but that doesn’t mean you shouldn’t begin your preparations well in advance!
At Innvision, we pride ourselves on our level of service and commitment to clients. By attending the Lodging Conference and tapping into the data, trends, and challenges of today and tomorrow, we can use this perspective and be better equipped to offer viable design and FF&E solutions to hotel owners and operators.