Conditions in the lodging and hospitality real estate sector are healthy overall, but the combination of ongoing labor shortages, interest rate creep, and high construction costs are acting to soften margins, says Daniel Weede, partner in Morris, Manning & Martin’s hospitality, real estate, and real estate development & finance practices.
Speaking on the REIT Report, Weede noted that “there's a lot of optimism in this industry, and I think, at least for the next several years, that's likely to stay.” However, “margins are thinner,” he added.
Weede also discussed the potential for consolidation, noting that there will be likely be more merger and acquisition activity in the next 12 to 24 months than seen in the previous 12 to 24 months. “It's a healthy industry, but you've got some players that are doing really, really well, and others that are struggling a little bit.”
Elsewhere in the interview, Weede noted that:
- Shortage of labor is the number one industrywide issue for hospitality.
- Guests, particularly post pandemic, are willing to pay more for unique experiences. “This industry has to do better at figuring out how to provide those unique experiences.”
- Airbnb continues to be a “really strong competitor” for the industry.
- The new normal for business travel remains to be seen.