a view from wall street on the hotel industry

On Friday, May 5th, I had the pleasure of attending a great panel discussion surrounding the views of wall street on hotels.  The discussion was held at the Tisch Center for Hospitality and Tourism at NYU, the panelists included:

Vijay Dandapani, President and Chief Executive Officer
Hotel Association of New York City

Thomas Allen, Executive Director and Lead Analyst Gaming and Lodging
Morgan Stanley

Stephen Grambling, Vice President and Lead Analyst Gaming, Leisure and Lodging
Goldman, Sachs & Co.


The morning began with an informal networking session followed by the introduction of the individuals and the table was set for the discussion.  These panelists started with key points on what an investor wants to understand that impacts the industry and specifically the stock of a particular company.  They were asked if they would be a buyer or a seller of hotels right now.  I was intrigued by this part mostly, hotel companies have a neutral rating with the preferred being “asset light”, companies having relatively few capital assets compared to its operations.


Projections for 2017 state a 2% growth in RevPAR (revenue per available room for my non hotel folks) and flat RevPAR growth for 2018.  Specifically in NYC there are some industry impacts that are affecting this including escalating property taxes, labor costs, business costs overall.  Even though RevPAR in 2016 was up $5 from 2008 RevPAR is down thirty percent from the previously noted factors.  The market is seeing an increase in new supply that has been in the works for several years when opening in NYC was a better opportunity.  The year on year growth has not panned out and the inventory has not been absorbed yet.  NYC in three years has seen a 15 percent increase in supply while the rest of the country has only seen a 3 percent increase.  Similarly in China the luxury and economy markets are over-saturated leaving the middle a great place to grow and is the focus and soon will be over-saturated as well.


Of course, as most discussions turn recently in the industry, the sharing economy or AirBNB specifically came up.  There were a few interesting points only I would like to make from this portion of the morning.  Two years ago 4,000 individuals were surveyed and 12 percent had used AirBNB and 17 percent were expected to use it in 2017.  A second survey on 2016 revealed that 18% had used AirBNB and 24% expected to in 2017, 1 in 8 trips were planned use of an AirBNB property.  More of the conversation surrounded reductions in compression nights, price transparency driving rates down, and guests looking for an experience rather than just a stay.  Additional disruptions are expected from TripAdvisor, overlapping inventory between OTAs and other sharing sites like HomeAway, as well as re-pricing tools, and where Google will land in all of this.


Hotels can do a better job of desegregating pricing like the airlines if we are going to be dependent on online travel agencies- i.e. not paying commissions on the add-ons.  This was an interesting take that I had not considered prior.  A number of $6B was thrown out there for how much only 2 companies spend on marketing- Expedia and Priceline, while the 5 largest hotel companies combined spend $2.6B.  The message here is not spend more rather the industry needs to work to create a different experience.


The last point of the day that caught my attention was surrounding travel bans, while they have certainly impacted NYC, the rest of the country has not seen the same.





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