(Hot)el industry turning cold?

Major hotel stocks such as Marriott and Starwood at are at five year lows and according to some analysts the industry and per a CNN report the outlook is “is exceptionally pessimistic right now as people are very concerned about the economy”. So for the year “Hotel stocks have been under siege on economic concerns with Marriott’s shares down 29% year-to-date, while Starwood’s stock has fallen roughly 41%”. That trends looks set to continue unless there is a “reversal in economic fundamentals” that could come about if the current credit squeeze strangling the larger economy is eased with the passage of the infamously labeled “bailout bill“.

A Forbes article on the same topic headlined “Hotels foresee lots of vacancies” notes how “Investors were low on hospitality Thursday morning after Marriott International reported disappointing profits and dimmed its outlook for 2009. High gas prices and the rising cost of food have shifted consumers’ spending habits, causing them to spend more on necessities and less on discretionary items such as lavish vacations and lengthy hotel stays. The rising cost of airfare has also kept people at home”.

As in most storms, it is hard if not impossible to see the sun. The industry has been through many a storm in the past including most recently in the aftermath of the 9/11. The silver lining, such as it is, is the industry is well girded to withstand a typical (though not extended) recession owing to large sums spent on a variety of FF&E areas during the healthy part of the cycle. Meanwhile, for hotel guests a short recession probably represents an excellent value proposition owing to some inevitable pricing pressure.

Published by

Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.