HAMA survey reveals asset managers' optimism, challenges.

by Elaine Simon from Hotelmanagement.net

The results of the latest survey from the Hospitality Asset Managers Association shows that members are optimistic about the direction the hotel industry is taking—but it is by no means out of the woods yet.

“As vaccinations in the U.S. continue, it would appear the light at the end of the tunnel for the hospitality industry is coming into clear focus, and we are delighted to find it is not an oncoming train,” said Larry Trabulsi, EVP at CHMWarnick and current HAMA president. “Based on our findings, while there is obvious optimism about a much quicker-than-expected recovery, a meaningful percentage of hoteliers still are working towards solutions. We are confident that better times are not too far ahead. Whether or not individual owners and properties will continue to survive and hopefully thrive remains to be seen.’”

The biannual survey of asset managers' thoughts, experiences and forecasts included approximately 100 participants this year, taking a look at predictions for when revenue per available room would return to 2019 levels, the status of the lending market, current acquisition appetites, new brand/management plans and the leading issues of concern for asset managers right now.

HAMA’s U.S. members represent more than 3,500 hotels and resorts comprising 775,000 hotel rooms.

Survey findings show that:

Nearly 30 percent of respondents are contemplating brand or management changes as part of their recovery strategy, approximately 5 percent believed they would change brands, 10 percent foresaw changing management companies and roughly 15 percent believe they would change both.
Approximately 15 percent of participants expected to either hand back keys to the lender or enter into a forced sale situation. Nearly 10 percent already had.
Most HAMA members (50 percent) believe RevPAR will return to 2019 levels by 2023. Not quite 10 percent believe it will occur as early as 2022, while approximately 37 percent believe it will happen in 2024. Predictions for 2025 and 2026 came in at 3 and 1 percent, respectively.
The three factors most concerning to participants right now are labor availability (75 percent), demand (60 percent) and labor costs (55 percent).
On average, in urban markets for full-service and luxury properties, nearly 45 percent of those surveyed anticipated acquisition price discounts of 11 to 20 percent. While one respondent believed discounts could reach 41 percent or more of prepandemic pricing, approximately 15 percent felt discounts would be as low as zero to 11 percent.

Facing Challenges

Trabulsi said the question about the number of owners handing keys back showed the issue is a complicated one.

“Obviously, the good news is the blue bar [indicating owners don’t expect to hand back the keys] is out into the high 70 percent. The bad news is the orange bar [showing nearly 10 percent] have already handed something back and the green bar [showing the more than 10 percent] who are expecting to going forward,” he said. “Again, certainly a sign that there is distress out there—could be that the shoes may not have fully dropped as of yet—but there [are] still some headwinds here of folks seeing those market conditions start to recover. There's still a lot of work to be done.”

Labor is weighing heavily on the minds of HAMA members, both the availability and cost.

“The labor piece is very interesting when you think about pre-COVID when we were running 80-odd percent occupancy, we were all talking about [how] we didn't have any labor. Now we're running 30 and 40 percent occupancy and we still have no labor,” Trabulsi said. “A variety of factors that go into that, but it's interesting that we're having the same problem we had 40 points of occupancy higher than we are right now.”

HAMA board member Chad Sorensen, managing director and COO at CHMWarnick, said the industry as a whole is trying to solve the labor problem.

“It is going to be a very challenging summer, so it's a bittersweet recovery,” he said. “I think most believe that the summer season is going to be very robust, both air travel and drive travel, but the operating environment is going to be very challenged with this labor piece. It's going to be an interesting summer.”

Taking a Look at Relationships

Around 30 percent of respondents indicated they are looking to change their brand, their management company or both. According to Sorensen, that decision is part of a larger strategy to reset performance for the recovery.

"And with that comes [the question of] is the right brand on the hotel? Is it the right management company? Is it the right brand versus third-party structure in play?” he said. “This has presented an opportunity for ownership groups to really try to figure out what the best positioning and structure looks like moving forward. There's a lot that's going to take place here in the next 24 to 36 months. I think the industry [will look very] different in three years.”

Trabulsi attributed part of the reason hotel owners are rethinking their set-ups to the fact that the pandemic has caused many of the franchise companies to gut their staffs, reducing the amount of personal support provided to franchisees. This is leading to owners keeping the flag but going the third-party operator route instead of being brand-managed, he said.

This portfolio evaluation will take place above the property level, as well, Sorensen predicted.

“On the flip side, because of the impact at the brand level of the larger brand companies, I think they're evaluating what business they want to be in. Is it a brand business, franchise business or is it a management business?” he said. “I think we will see a significant shift out of brand management of noncore assets for brands into a franchise model with third-party managers. We're starting to see that already. I think there's a lot more of that to come.”