How Will Inflation Impact a Hotel’s Performance & Consumers in 2022
How Will Inflation Impact a Hotel’s Performance & Consumers in 2022?
Mountain West’s hospitality broker team says inflation is impacting hotels in two major ways. First, owners should be able to raise rates at the same time they will pay more for labor and supplies. Second, hotels offer an inflationary hedge to real estate investors because of all the product types, the length of tenant stay is the shortest. You can raise rates daily vs. other product types that take years to change lease rates.
What is Mountain West seeing in the current hotel transaction market?
Post pandemic, experts at Mountain West say there is a robust hotel transaction market. Numbers indicate a 269% increase since 2020 and a 32% increase since 2019. Since 2021, Mountain West’s hospitality team has sold 15 hotels totaling $113 million in volume.
“In Utah, resort, or destination markets are at top of buyer’s preferred locations and interstate markets proving resilient,” agent Wes Christensen said.
Across the nation, urban markets bouncing back after people moved to less populated areas during the pandemic. Across the board, Private equity represented 50% of volume in 2021.
Do you think it’s currently a buyer’s or seller’s market?
Currently, we are seeing it is a seller’s market, every listing in 2021 received multiple offers, several deals trading at or above list price. There are simply more buyers than sellers right now, and the buyers have raised more money than they can deploy. It’s forcing buyers to overpay so they can place capital. With interest rates rising, buyers are eager to place capital while they can at lower interest rates
What is the biggest problem you see for hoteliers in 2022?
PIP’s, franchises have been forgiving on property improvements over the course of the pandemic. We’re starting to hear that they are putting their foot down and requiring improvements to be made. Direct project costs are skyrocketing – case goods, carpet, labor. This is going to make acquisitions and ongoing ownership very expensive.
Direct project costs are skyrocketing, everything from case goods, carpet, to labor. Due to supply’s costing more, it is going to make acquisitions and ongoing ownership very expensive.