Hospitality trends 2017
Observations from the annual Washington, DC Hospitality Sector Roundtable
We surveyed hospitality sector leaders in the Washington, DC metro area on 28 June 2017 and invited these individuals to a roundtable to discuss the survey results and industry trends.
Our survey and discussions focused on the economy, transactions, capital markets, brands, technology, millennials and the industry’s focus on trends affecting the broader US hotel market.
The US economy experienced gross domestic product (GDP) growth of 2.6% (advanced estimate) for the second quarter of 2017, an increase from 1.2% growth achieved in the first quarter of 2017, and an increase from 2016 growth of 1.6%. The Federal Open Market Committee estimates a median GDP growth of 2.2% and 2.1% for 2017 and 2018, respectively.
Based on the survey responses, the outlook was relatively aligned with the aforementioned forecasts, with 62% and 52% of respondents anticipating growth between 2.0% and 2.5% for the second half of 2017 and 2018, respectively.
Survey respondents were relatively split evenly across their investment strategies over the next 12 months, with 29% stating they plan to buy, 24% stating they plan to sell, 24% plan to develop and 24% plan to hold. Moreover, over the next 12 months, survey respondents anticipate international capital to remain the most active purchaser in the hotel sector (45%) followed by private equity (25%) and REITs (25%).
The view on the current availability of debt financing remains relatively unchanged from last year, with 38% of survey respondents viewing the availability of debt financing to be about the same as last year and 33% viewing the availability of debt being greater than 12 months ago.
The primary customer focus in the hospitality industry is the millennial and Gen X generations, as discussed during the roundtable. According to research performed by The Center for Generational Kinetics, a consulting firm focusing on issues of millennial consumers, millennials are anticipated to outpace baby boomers in hotel spending by 2017, with expectations that millennials will dominate the purchases in the travel industry by 2020.
As brands compete for revenue from this generation of travelers, it is important to consider development details that millennials value: customized experiences, digital convenience and attention to design.
In terms of US market focus over the next 12 months, survey respondents indicated that secondary markets (68%) were most attractive, followed by primary markets (26%) and tertiary markets (5%). No survey respondents selected destination resorts as an attractive market for development.
Market participants express that although the hospitality industry is a macroindustry, each market is unique, increasing the importance of proper due-diligence and feasibility when exploring opportunities.