Boom and Challenge Expected

As the U.S. lodging industry booms ahead of the world, and meetings, conventions and events increase, buyer and seller relationships will share challenges that require sustainable relationships and strategic negotiation skills. CNBC just reported the U.S. hotel industry is booming ahead of the rest of the world. Americas Lodging Investment Summit delegates (98%) expect positive RevPAR gain in 2013 for the U.S. with drastically lower growth in Asia and Europe.

All indicators are that the meeting, convention and event planning occupation is also in a boom; with 44% growth projected by 2020 by the U.S. Department of Labor, Bureau of Labor and Statistics. Meeting, convention and events are one of the major drivers of business in hotels, so the puzzle fits nicely together. In many organizations marketing and meeting personnel work together. It’s therefore no surprise that many marketing occupations are also slated for faster than average growth.

When people meet, business happens.

Meetings, conventions, and events serve as a gateway to other hospitality industries. A major percentage of hospitality venues and service providers target meetings, events, conventions and tradeshows as their primary market. The “then and now” perspective of these symbiotic industries were addressed in my article, Evolution of a Profession awhile back.

As we recover from our economic doldrums, it’s pretty clear that it takes less time to implement a meeting, convention, or event than it takes to build a new venue. Financing for a new hotel today requires about 40% down payment. Financing for a refurb is at about 20%. So for the time being we will see few new properties built and many tired properties given a face lift with a new flag.

Veterans in our industry have witnessed this pendulum swing back and forth over the decades. We are now officially in a time period where the supply does not quite meet demand and according to Mark Woodworth, president of PKF Hospitality, a hotel property-research firm, this trend is expected to continue into 2016. In the CNBC release, Woodworth stated: “Growing demand in the face of very limited new supply sets the stage for very attractive room rate increases and therefore profit growth.” In fact, he likened the market’s position to the good times of the mid-1970’s. “Key fundamentals, including demand growth, average daily rate growth, revenue growth and profit growth are several times their long-run averages, while new construction is well below average.”

The margin of demand and supply will continue to narrow over the next several years. It’s a fact of life and business. Cautionary tales of abusive buyer-seller relationships from the past several years will be good to remember during this new pendulum swing. Why? We can all bet that the pendulum will swing back around by 2020 and that buyers and sellers in our industry have a long memory.