The Lodging Conference 2023: Women on the Scene with Insights, Economic Outlook and 2024 Projections
Economic Outlook and Predictions by Bernie Baumhol, chief global economist, The Economist Outlook Group, LLC
During the 'Economic Outlook' session, Bernie Baumhol, chief global economist, The Economist Outlook Group, LLC, provided an insightful update on the economy and its implications for our industry. Baumohl predicts a challenging conclusion to 2023. However, unless an unforeseen 'black swan' event occurs, which he estimates to have a one in three chance of happening, we should witness signs of a recovery, especially in the latter half of 2024. These potential Black Swan events include:
Internal United States risks:
Federal Reserve over-tightening, causing the economy to stumble.
Deepening financial stress in commercial real estate triggering a broader banking crisis
Emergence of a new, faster-spreading COVID strain immune to current treatments and immunities.
The 2024 Presidential Election escalating into political gang warfare, resulting in widespread social unrest and violence.
Ongoing Russian-Ukraine war worsening and involving NATO countries.
China intensifying aid to Russia, diverting U.S. and NATO focus towards Ukraine, with intentions to annex Taiwan by 2027.
Looming catastrophic cyber event threat, highlighted in a recent Global Security Outlook Survey where over 90% of cyber security experts warned of a catastrophic cyber event within the next two years.
Baumohl emphasized that the Federal Reserve will continue to pause interest rates while watching oil prices as they could potentially cause further increases. The staggering $1.5 trillion commercial real estate debt coming due by the end of 2025 might also impact the economy. Delinquencies are on the rise across all real estate sections except industrial. Moreover, Baumohl discussed the record-breaking consumer credit card debt exceeding $1 trillion for the first time. While acknowledging potential impacts on spending for hotel stays and travel overall, he remains positive about the economy, citing the current state of the job market and the continued purchasing power of consumers. He said it is hard to have a full-employment recession.
AHLA Foundation Recognizes Julienne Smith
In other news, the AHLA Foundation, the charitable arm of AHLA, awarded Julienne Smith, Chief Development Officer, Americas, IHG Hotels & Resorts, the Peggy Berg Castell Award. This Award celebrates remarkable women leaders in the hotel industry. It was renamed this year to give tribute to the legacy and commitment of Peggy Berg, The Castell Project's founder.
Lodging Industry Insights from Women Leaders
While at the conference, I had the opportunity to speak to several women leaders. Overall, they expressed cautious optimism for the remainder of 2023. Stacey Nadolny, SVP Franchise Sales and Development, Wyndham Hotels & Resorts, shared that the "global development pipeline is at a record high, and we're seeing stronger retention rates than ever before." She added that U.S. travel demand continues to remain strong, and with the return of international travel, it seems we will have a successful close to 2023.
Tiffany Cooper, Chief Development Officer, Americas & The Caribbean, Aimbridge, identifies as an optimist, especially being in development. She said, "We've had a quiet first half for first three quarters of the year, and I'm hoping this conference will inspire a little bit more activity." Cooper anticipates we will see real momentum on deal flow start in the first half of 2024."
Preparing for 2024 and Budget Considerations
With the current pause in deal flow, owners are focusing on their existing portfolios and budgeting for 2024. Leticia Proctor, EVP Sales, Marketing & Revenue Management, Donohoe Hospitality Services, advises owners to brace themselves. "Due to softening leisure demand and mid-week travel still recovering to 2019 levels, hotels will not experience double-digit RevPAR index growth as seen in the previous 24 months. Additionally, as wages continue to rise due to labor shortages and the increase in supply costs, there will be stress on profitability."
Heidi Wilcox, President/CEO, First Call Hospitality, is sharing detailed insights into budget considerations with their owners. "This includes the slight increases in group bookings, which should translate into meeting increases in revenue budgeted. But now more than ever, costs need to be held to maintain top of mind with our guests." She recommends making any capital improvements that will immediately affect guest stays positively.
The Influence of the 2024 U.S. Presidential Election on the Lodging Industry
While the 2024 U.S. presidential election promises to influence various economic facts in the coming year significantly, the prevailing normal for corporations is to carefully await election results before committing to any major strategic decisions. Wilcox highlighted, "Certain states will continue with no outside election pressures. They do not have the exaggerated highs or lows to pressures such as the election." Proctor added, "In this political and geopolitical climate, the path to solve inflation challenges and stabilize the economy will be key. If the plan continues to negatively affect discretionary spending due to high-interest rates and the rising cost of consumer goods, regardless of who's in office, the industry will be affected. That said, I remain guardedly optimistic we will still have positive YOY growth." Cooper adopted an economic standpoint, expressing hope that an election year might usher in a slowdown of interest rates, which in turn would contribute to a much-needed easing of inflationary pressures."