Hospitality Investing News - Southeast July 2024

After months of positive news of decreasing inflation, inflation is proving to be more stubborn than originally anticipated causing the Fed to keep postponing any potential rate cuts. Many markets in the Mid-South and Southeast Regions saw decreases in overall occupancy but gains or steady growth in ADR. Today, in 2024, the decreases in occupancies are having their effect on ADR, showing a decrease in revenue by anywhere from 10%-20%. Much of this are markets stabilizing to performance levels had the surge in Southeastern US domestic travel post-COVID never occurred. Additionally, consumers are continuing to feel the increasing price of everyday goods. Forcing consumers to be more conservative about how they travel, how much they travel, and for how long. Many hotel owners are waiting on interest rate cuts, the election, and/or even further cooling of inflation to make business decisions and maximize their hotel values. The truth is interest rates are the canary in the coal mine when it comes to lower hotel values. The real culprit of lowered hotel values is lowered net operating incomes (NOI) due to the combined effect of decreasing revenues and increased operating expenses. However, the overall good news is corporate and group travel continues to inch back to pre-COVID norms. Wages have just started to increase greater than inflation. It will take some time for the overall system to stabilize from all the increases in inflation, but as wages continue to rise at a pace greater than inflation consumers will be adding to their savings, rather than depleting their savings accounts, increasing their confidence on traveling as they used to. When or how long that will take, is anybody’s guess, but a positive trend, nonetheless.