Green Street

 

 

Long Hotel Rally Losing Steam as Supply Swells, Business Travel Falls

According to The Wall Street Journal:

A nearly decadelong rally for the hotel business is showing signs of petering out.

Hotel owners in large cities say they are getting squeezed by weaker business-traveler demand, higher labor costs and a crush of new hotel projects that is weighing on room rates.

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Investors are pricing in a higher probability that the U.S. economy is closer to a downturn than a year ago, said Lukas Hartwich, an analyst at Green Street Advisors.

“Things could get uglier in the short run,” he said. Slower corporate profit growth is curtailing demand from business travelers, he added.

New York City looks particularly vulnerable. Labor costs have been rising and the number of hotel rooms has ballooned to more than 125,000, with around 13,200 new rooms added since 2016.

Some hotel owners have been selling properties below their purchase price. In 2011, Host Hotels & Resorts bought a 774-room hotel near the Grand Central Terminal in New York for $313.5 million. Host then spent $75 million to renovate the building, branding the hotel as the Westin when it opened in 2012. The Bethesda, Md.-based company sold the property this year for $302 million.

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