Hospitality industry poised to remain at a peak

Hospitality industry poised to remain at peak through 2017

In Hospitality, In the News by jfield0 Comments

Market Update

Hospitality industry poised to remain at a “peak” through 2017

As one of the prime markets for our modular bathrooms, Oldcastle SurePods keeps a close eye on the hospitality construction industry.

Looking at what a number of experts say leads to a cautiously optimistic conclusion: 2017 will be a strong year in hospitality, albeit with somewhat flat growth over 2016 as the industry is at the peak of a market cycle, and with potential declines in 2018.

This position is summed up well by the market experts at CBRE Hotels:

“Lodging is a cyclical business, and we continue to see U.S. hotels sit on top of the peak of the cycle after recovering from the Great Recession. We are encouraged by the positive outlook for lodging demand and resulting high levels of occupancy. While flat performance sounds disappointing, the strong underpinnings supporting continued growth in travel will prevent an outright fall from the peak.”

Several others market forecasters come to similar conclusions, albeit with more downside risk in 2018:

  • Robert Rauch, CHA, hotelier and President of R. A. Rauch & Associates, Inc.: “2017 looks to be another solid year for the lodging industry with three percent growth in gross domestic product, nearly double what we originally forecasted early in 2016. We are no longer calling for a soft landing in 2017 (it still could occur in 2018)…”
  • ConstructConnect: “The current buoyancy in hotel/motel construction will almost surely be winding down by 2018.”
  • Dodge Data & Analytics: “Hotel construction, while still healthy, will begin to retreat after a strong 2016.”

 

As with any forecast, a number of caveats underlie these conclusions, so it is worth taking a few minutes to read each of the above brief pieces.

Many in the hotel industry naturally wonder what impact home rental networks like Airbnb will have on the hospitality business. The 2017 JLL Hotel Investment Outlook takes a sanguine view of the impact from these services:

“Disruption from home rental sites and alternative accommodations remains relatively small in the grand scheme of the global lodging sector. Home rental sites and the alternative accommodations market account for approximately 10% of hotel room bookings in the top global gateway markets such as New York, London and Paris, according to calculations by JLL. Alternative accommodations have notable runway for growth in secondary and tertiary markets, but our research suggests that the number of room nights accommodated by such platforms is already plateauing in urban gateway markets; in part due to the number of willing hosts reaching a structural ceiling.”

 

From our own view of the market, hospitality is looking very good as we continue to deliver bathroom pods to high-end hotel projects throughout the U.S. And, our biggest project to date – the Baha Mar Resort in Nassau, Bahamas, is scheduled to open in April.

 

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