Hospitality Leaders Highlight Investment Opportunities Despite Economic Headwinds

Despite ongoing economic challenges, hotel industry executives at the Americas Lodging Investment Summit emphasized that the sector’s fundamental demand and long-term prospects remain strong, with current pressures viewed as cyclical rather than structural.

Current Economic Pressures and Industry Outlook

Hotel industry leaders acknowledged that macroeconomic headwinds have impacted the sector in the past year. At the Americas Lodging Investment Summit, members of the Industry Real Estate Financing Advisory Council urged hoteliers to consider the broader context. Larry Kwon, managing director at Moelis & Company, stated that while concerns about cash flow, margins, and business durability are prevalent, the perception of the hospitality sector as a declining industry is inaccurate.

Kwon described the current pressures as cyclical, noting that, over the past 10 to 15 years, demand for hospitality assets has remained positive. He argued that pessimism in the sector is likely overstated and that, compared to other real estate asset classes, hospitality continues to show resilience.

Investment Opportunities in a Changing Market

Panelists discussed the current investment climate, with Louis Stervinou, managing director at Eastdil Secured, asserting that “the time is now” for hotel investment. He highlighted the functioning capital market and its ability to underwrite growth, suggesting that current yields present a unique opportunity.

Shai Zelering, global head of hospitality for Brookfield Properties, agreed that current market conditions favor long-term investors. He recommended focusing on hotels in secondary and tertiary markets, citing favorable dynamics such as labor, infrastructure, and manufacturing. Zelering expressed less confidence in the top 10 markets, which he described as less business-friendly.

Leeny Oberg, chief financial officer and executive vice president of development at Marriott International, outlined her investment preferences as she prepares for retirement. She would target resorts outside major markets with a wellness focus, as well as efficient select-service hotels in promising locations. Oberg also noted an unprecedented split in hotel demand across different chain scales and cautioned that the industry may need to adapt to ongoing uncertainty, which could represent a new normal.

Oberg identified unemployment as a key metric to monitor, arguing that GDP figures can be misleading if they do not reflect actual income and job availability, which drive consumer spending.

Operational Focus and Managing Uncertainty

Larry Kwon advised industry participants to focus on controllable factors such as cost structure, margin, and cash flow, rather than attempting to predict market movements or revenue per available room (RevPAR). He emphasized that operators should adapt to uncertainty by concentrating on operational efficiency.

Kwon noted that this approach has led some third-party hotel managers to view themselves more as professional services organizations rather than traditional hotel companies, reflecting a shift in operational mindset.

Artificial Intelligence and Technology in Hospitality

The panel also discussed the potential impact of artificial intelligence (AI) on the hotel industry. Shai Zelering expressed skepticism about AI’s immediate effects, citing the sector’s slow adoption of technology and the limited financial benefits for hotel owners. He argued that the primary focus should remain on enhancing the guest experience, rather than on technological change for its own sake.

Leeny Oberg offered a different perspective, suggesting that AI and digital tools can improve the guest experience even before arrival, potentially reducing affiliation costs over time. She argued that technology could streamline the customer journey and enable hotel staff to focus more on direct guest interactions.

Larry Kwon identified the aggregation and use of customer data as an area where AI could provide significant benefits, allowing hotels to offer more personalized experiences. He suggested that major hotel brands are well-positioned to leverage these insights.

Zelering added that increased AI-driven productivity across industries could lead to more leisure time for consumers, potentially boosting long-term travel demand.

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