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Hotel Market Outlook – Optimistic with Some Footnotes

Virtually any time economists predict growth it the hospitality industry, they’re cautious to note potentially offsetting trends. This is healthy, as unbridled optimism doesn’t serve the industry well.

The tendency to temper a positive outlook shows up in Deloitte’s 2018 Travel and Hospitality Industry Outlook. On one hand, the report predicts “strong 5-6 percent growth throughout 2018, setting up the industry to hit a record-breaking $170 billion in gross bookings.” Nevertheless, this bullish outlook sits immediately under the headline, “Hospitality: Hurdles on the track to growth.”

Chief among those potential hurdles is the fact hotel performance cycles tend to occur every 10 years, and the current upswing has been underway for 8 years. Despite the current hotel growth cycle potentially reaching the end of its run soon, in a Hotel Business magazine story, Marcello Gasdia, manager and research lead for Deloitte’s Travel, Hospitality and Leisure (THL) sector sees several key growth drivers for 2018:

  • A growing worldwide middle class that can afford to travel

  • Consumers shifting spending from goods to experiences

  • “Healthy” U.S. corporate travel demand

For those of us in the AEC industry, what does optimistic growth with some footnotes mean for new hotel construction deals? Robert A. Rauch, CHA, president of RAR Hospitality, doesn’t see new supply stopping 2018 RevPAR growth, and that banks will moderate lending to avoid deals that come too late in the current business cycle. “That means those who are experienced, have solid equity, leading brands or unique ideas, are in great markets and are considered trustworthy and strong borrowers will be able to develop,” he said.

We love such “experienced” developers who have “unique ideas” and “leading brands,” as they tend to be the visionaries who see the benefits of trying innovative ways to build – such as modular construction – in order to complete their projects despite ongoing severe labor shortages.

Interested in learning more about hospitality projects that have incorporated prefab construction? Visit our hospitality project portfolio.


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