Six Travel Trends Impacting Real Estate
Globalization, urbanization, and digitization (basically all the 'zations) are transforming the travel industry right before our eyes. Bisnow was on hand as the biggest names in hospitality discussed them yesterday. What you should know:
1) There's a good run ahead of us.
Even though we're already in our fifth year of heady RevPAR increases, we've got another four or five years—and perhaps even longer—of positive hotel fundamentals ahead of us, reported the panel of REIT experts at NYU's annual hospitality conference at the Marriott Marquis. Those 'zations "have put us in an era we've never seen before," says Hersha Hospitality CEO Jay Shah, far right, joined by JLL Hotels CEO Art Adler, RLJ Lodging CEO Tom Baltimore, Ashford chairman Monty Bennett, and Summit Hotel CEO Dan Hansen. Despite overbuilding concerns, Tom says NYC will be fine, but some operators are losing courage to push rates in the face of competition.
2) The government needs to step up and help.
The US hospitality industry has recovered all the jobs it lost during the recession and then some, to the tune of eight million paychecks in April, reports Loews Hotel chairman Jonathan Tisch (right, celebrating his 20th year of chairing the conference, here with NYU divisional dean Bjorn Hanson). It's also responsible for $180B in exports. "So it's fair to ask the government to be our partner in growth," he says, by reauthorizing Brand USA and focusing on visa, customs, and immigration reform and infrastructure investment. But there's a misconception among policymakers and the media that these new jobs aren't critical; he says that every Boeing jet that arrives in the US with 467 passengers supports 14 hospitality jobs.
3) Luxury is trending younger.
Travelers are more diverse, young, and global, and more people are crossing the threshold of being able to stay in luxury hotels, reports Starwood CEO Frits van Paasschen—in fact, the first person to check in to the newly redeveloped St. Regis New York was only 18. (Frits is snapped far right with NYU's Bob Boland, Four Seasons CEO Allen Smith, IHG CEO Richard Solomons, and Marriott CEO Arne Sorenson.) Arne recalls meeting a young Chinese traveler, about 27, who was keeping a diary of all the hotels he visited—and 15 of them were Ritz Carltons. But figuring out what to offer these travelers is less predictable—they don't care about the look of the hotel, but the people and culture, and want a "bespoke travel experience," says Allen.
4) If you want in the game, you need to take risks.
Fresh off of its agreement to buy the 3,000-room Cosmopolitan Las Vegas casino hotel from Deutsche Bank for $1.7B, Blackstone global head of real estate Jonathan Gray joined ABC News' Rebecca Jarvis for a one-on-one. While some have questioned the buy, Jonathan says it was at a substantial discount to replacement and he believes Sin City will be coming back. "There's a natural inclination to hide under the covers during a downturn," but there's a good opportunity to create value—Blackstone's $6B stake in Hilton is now worth $17B. Where he's bullish: India, China, Colombia, San Francisco, Oahu, Las Vegas. (You gamble in all those places—though in some it's with the food.)
5) There's so much beyond Manhattan.
"If it ain't broke, don't fix it," Mayor Bill de Blasio told the crowd of the City's decision not to pursue the 2024 Olympics, citing immense expenditures and investment that comes along with hosting. It's not like we need to lure the crowds: 54 million people visited NYC last year, bringing $39B in direct spending and supporting 350,000 jobs, while hotel nights are up 6.9% and Broadway had it's biggest Memorial Day week in history, he says. Tourists are even showing love to the 718, like visiting the Bronx for the zoo, Arthur Avenue, and the birthplace of hip-hop. And Astoria is the next best thing if you can't afford a ticket to Greece, he says. "It's a five-borough effort... there are so many extraordinary things to discover" and a richer experience beyond Manhattan.
6) Upping local wages will only hurt, not help.
AH&LA CEO Katherine Lugar and Penn State School of Hospitality Management director Dr. John O'Neill were on hand to release a joint study by AH&LA and the Asian American Hotel Owners Association on the impacts of extreme local wage initiatives. They're popping up all over the US, Katherine says. For one, LA is proposing upping the local wage for hotel workers to $15.37/hour. The study found that in order for hotels to make up for that lost revenue ($106M in lost annual guest room revenue, $16.4M in lost occupancy taxes, $2.9M in lower corporate taxes, and losing $20.1M in hotel values), nearly 1,400 hotel staff jobs there would need to be cut. These measures threaten an industry that "embodies the American dream... CEOs have worked their way up from entry-level positions," she says.