2022 Hospitality Year in Review - Vol.1

WHAT'S BEEN HAPPENING IN AFRICA?

Author, Trevor Ward , ISHC, Managing Director, W Hospitality Group, Lagos, Nigeria, specializing in the provision of advisory services to the hotel, tourism, and leisure industries.

Since 2009, we have been monitoring and measuring the development activities of the international and regional hotel chains in the 54 countries of Africa – from Egypt to Morocco in the north, down to South Africa at the southernmost tip of this vast continent and including the island nations in the Atlantic and Indian Oceans. 

At the beginning of 2022, we counted a pipeline of 447 upcoming hotels with 80,291 rooms. It’s the highest number since we started the survey. That’s good, but what really matters to the shareholders is not a paper contract, or even a construction site, it’s hotels opening and selling rooms!

So, we also measure actualisation rates, by comparing the number of hotels opened by 31 December with what the chains said they would open at the start of the year:

We were doing so well in 2019! But the wheels fell off in 2020 and 2021, for reasons it would be very hard to forget, and sadly we didn’t see the hoped-for recovery in openings in 2022, with continuing headwinds including (mainly) funding and supply chain delays.

The takeaway from these data (and the fact that RevPAR recovery in some African cities is way ahead of 2019)? There’s so much more for us to do in Africa!

APAC PANDEMIC POST-MORTEM AND PROGNOSIS

Author: Ben Hirasawa , ISHC, Founder & Managing Partner, Benjamin Hirasawa Hospitality International whose primary focus is to provide practical and commercially sound advice to private equity, hospitality, corporate and real estate clients on international business transactions.

 In 2022 the Asia Pacific hotel industry experienced mixed results in its ongoing effort to recover from the debilitating effects of the global pandemic. Although occupancy rates and other key metrics returned to pre-pandemic levels in certain markets after the lifting of travel restrictions – Singapore hotels’ ADR and gross revenues hit 14-year highs in September - the region also experienced labor shortages, inflation, and geopolitical instability. 

 Increased interest rates sidelined many institutional investors as potential purchasers; private investors and family offices with a lower percentage of debt in their capital stack were often the primary beneficiaries of their absence.  The knock-on effect of Japan’s election to not mirror the rate hikes has created a significant amount of interest and opportunities in Japanese properties, however, lower cap rates and non-aligned seller and buyer expectations often result in a 10% to 20% price gap between buyers and sellers across the region.

With the brunt of COVID-19 seemingly in the rear-view mirror, the pandemic nonetheless continues to create a wide range of potential challenges and opportunities heading into 2023.  

HOSPITALITY MARKET IN AUSTRALIA: FUTURE TRENDS

Author: David Simpson , CPA, ISHC, HAMA, Managing Director, Axsia, who pride themselves on hotel asset management but offer a diverse range of complementary advisory services across the entire investment lifecycle.

The latter part of 2022 saw strong COVID 19 Pandemic recovery driven by domestic leisure driving higher ADR’s. Expectations are that RevPAR will exceed pre-pandemic levels by 2023/24, with recovery of domestic corporate and international business. Labour shortages continue to be an issue.

The new supply pipeline is at risk due to:

• Increasing interest rates caused by high inflation in addition to lower LVR’s from major banks
• High building costs are caused by several factors including high cost of raw materials, high demand for labour due to high government infrastructure project spending, and building company collapses

Operators are under pressure to perform with more hotels and fewer resources. We see a trend toward brand franchises and third-party management companies. Owners will need to take a more active role to achieve optimal returns.

RECOVERY IN THE CANADIAN HOSPITALITY INDUSTRY BY 2023, BUT...

Author: Lyle Hall , CMC, ISHC, Managing Director, Hall Hospitality Advisors, Inc. an advisory company to the tourism, hospitality, and gaming industries.

Most pundits agree, and the data show, that performance of Canadian hotels in 2022 is nearing 2019 levels. A similar pattern is evident across related hospitality sectors ranging from foodservice to attraction, to gaming/casinos and entertainment. Soft spots yes, but overall, a strong recovery.

 But…what’s the short- and medium-term outlook: How long, if ever, will it take for corporate and corporate group to return to pre-pandemic levels? Occupancy recovery is great...but where will the labour come from? How will the introduction of online gaming in several provinces affect traditional bricks-and-mortar gaming establishments? Will the forecasted 2023 recession occur and, if so, what impact on rate, development activity, labour cost, etc.?

Forecasting for 2023? Not for the faint of heart!

CHICAGO'S DILEMMA

Author: Theodore Mandigo , CPA, ISHC, MHS, CHRM, President, TR Mandigo & Co. a hotel consulting firm specializing in market feasibility studies, impact analysis, litigation support, asset management, financial analysis, and acquisition due diligence for hotels, resorts, and F&B operations.

Chicago is a convention city. With indoor gatherings banned during the peak of the pandemic nearly 20,000 rooms were temporarily closed, and the remaining inventory operated at a 27 percent occupancy level. The impact from lost convention and trade show business was an estimated 5 million room nights or half of the total rooms sold in a typical year. Recovery lagged the nation’s because of the uncertainty of potential imposed restrictions due to new variants causing costly cancellations for booked events, and long planning and lead times for major trade shows and conventions bookings were slow to come back. Tourism and leisure surges with pent-up demand including postponed wedding, reunion and anniversary plans filled a portion of the gap. Business, on the other hand, remained low with many organizations slowly returning to the office from remote work practices. This combination of events exacerbated recovery, now projected to extend into 2024, with a forecast of a recovered convention and trade show segment performing about 15% below pre-covid levels. 

GREECE 2022

Author: Aris Ikkos , ISHC, Research Director, Institute SETE, a non-profit organization founded on the initiative of the Greek Tourism Confederation SETE

Greek tourism recovered very strongly in 2022, based on the strengthening of the Greek tourism brand. Tourism revenues are expected to reach 2019 levels. Resort hotels benefitted the most, with revenues increasing substantially (~20% on average), while increased prices and occupancy in Athens in the second half compensated for reduced revenues in the first half. Also, in Sept. 2022, the Singapore sovereign fund GIC acquired a majority stake in the Sani – Ikos resorts group, which was valued at € 2.3 B. In Oct. 2022, Goldman Sachs also acquired three hotels in Greece. Prospects for the Greek hospitality sector look very positive, with investments supported by low interest rate loans provided by the EU Resilience and Recovery Fund.

MEXICO BOOM-BOOM 22/23

Author: John McCarthy , ISHC, Executive Chairman/Partner, Leisure Partners SAPI de CV a hospitality, real estate advisory and development company.

Interesting year for Mexico in the tourism sector, especially in resort destinations. We have seen an incredible boom and already surpassed 2019 in international tourist arrivals in most resort destinations, this has been particularly notable in the Cancun/ Riviera Maya, Puerto Vallarta/Nayarit and Los Cabos. Overall arrivals by air are at 17,166 vs 15,961 million in 2019. One out of every four travelers from the US going abroad in 2022 came to Mexico vs. one out of every six in 2019! So, we are certainly improving our market share.

 Mexico is also favored by a strong National market which has also been doing some “revenge” travel, which in turn is favoring the aforementioned destinations, as well as more traditional markets, such as Acapulco, Mazatlan, Ixtapa, and Huatulco. 2023 is looking even stronger with very good numbers already in the books.

SPAIN HOTEL MARKET 2022 REVIEW AND 2023 OUTLOOK

Author: Ivar Yuste , ISHC, Partner, PHG Hotels & Resorts, experts in hotel consulting and the only independent consultant in Spain.

Spain, #2 globally in terms of tourism arrivals, was one of the world’s hotel markets deeply affected by Covid 19. 2020 and 2021 were challenging years, however, the majority of the Spanish regions are currently performing above 2019 levels.

Hotel investment was down 14% during 2022 to €2,5 billion.

Inflation has been so far completely transferred onto ADR, which is experiencing double digit growth since 2021.

Moving forward, according to SiteMinder, hotel bookings in Spain at the end of 2022 have reached a 4-year high, above competing markets such as Portugal, UK, France and Italy.

It remains to be seen how future interest rate rises could affect hotel financing and consumer spending in 2023. PHG foresees and increase in hotel investment levels for next year, mostly associated with international brands.

THE UAE: PROBABLY THE BEST HOSPITALITY BUSINESS REGION IN THE WORLD

Author: Scott Antel , ISHC, Hospitality & Franchise Lawyer, founder of Scott’s FZ, for international emerging markets hotel, branded residential and franchise legal advisory.

Long past emerging market characterization, with its proactive 1st country exit from the pandemic; collaborative industry/government tourism planning; willing embrace of new hotel, mixed use, and F&B concepts, including local sourcing and environmental savings technology, Dubai/the UAE is indeed today an industry leader on where the sector needs to go. There is no place in the industry more amendable and open to innovation and change.

HOTELS TO GROW IN 2023

Author: Isaac Collazo , ISHC, VP Analytics, North America, STR, a provider of data benchmarking and analytics for the global hospitality industry.

STR estimates U.S. hotel demand ended 2022 down 2.3% versus 2019 with 58% of the deficit occurring in 1Q when the Omicron variant was at its peak. The prospects of a shallow recession in 2023 looms but we believe hotel demand and RevPAR will remain positive. Solid employment, strong household finances, increasing business investment, and supportive corporate profits will drive the hotel industry upwards despite weaker economic conditions in the second half of the year.

HOSPITALITY OVERVIEW IN THE UNITED STATES

Author: David Sangree , MAI, CPA, ISHC, President, Hotel & Leisure Advisors, a hospitality consulting firm specializing in appraisals, feasibility studies, impact analyses, economic impact studies, and litigation support for hotels, resorts, waterparks, casinos, conference and convention centers, sports complexes, golf courses, ski resorts, amusement parks, and other leisure real estate.

1. Labor shortage: The national labor shortage continues to plague all aspects of the hospitality industry but is starting to show signs of improvement. According to figures from the Bureau of Labor Statistics, the industry is still down a million jobs from February 2020. This will continue to affect the industry in 2023.
2. Inflation: The Consumer Price Index (CPI) peaked at 9.1% in June 2022 and has been on a slow decline since as it was measured at 7.1% year-over-year in November 2022. While rising prices have helped hotels increase their ADRs, it has had a negative impact on the spending patterns of households.
3. Market segmentation: In 2023 we expect to see the commercial and group segments show growth while the leisure segment may show a slight decline as inflation and the pent-up demand from the COVID-19 lockdown dissipate.