Steven Selcer

NEWMARK WEEKLY LODGING INDUSTRY RECAP April 7 thru 13 Over the past week we saw how hotel transactions and trends in the broader capital markets are closely intertwined, significantly impacting investment strategies in the hotel industry. The latest CPI report showed unexpected high inflation, which pushed Treasury yields to their highest points this year. This shift is making hotel acquisitions more expensive due to rising borrowing costs. Despite these challenges, the CMBS market is still active, highlighted by Freddie Mac’s recent deal, indicating that there's still interest in hotel-backed securities despite economic headwinds. Additionally, the overall lodging sector has seen dips, with major hotel chains experiencing fluctuating stock values influenced by the broader economic climate and specific financial indicators like the slowdown in RevPAR growth among major C-Corps. Focusing on specific transactions helps to illustrate the dynamic nature of the market amidst these economic challenges. For example, the sale of the Hilton Back Bay in Boston for $171 million highlights ongoing interest in premium real estate, despite economic hurdles. Also, changes in hotel management, such as those seen at DiamondRock Hospitality, suggest strategic realignments within companies to better navigate the current economic conditions. These shifts are crucial as they indicate broader trends of adaptation and resilience within the hospitality industry, important for stakeholders like investment bankers and hotel managers to keep an eye on. Moreover, developments in the hotel sector extend beyond transactions to include expansions and renovations, showing a long-term confidence in the market’s recovery. Initiatives like the proposed convention hotel in Pittsburgh and major upgrades at Camino Real’s properties in Mexico exemplify this optimism. These developments, along with strategic acquisitions such as the purchase of the Courtyard Providence Downtown, reflect a thoughtful approach to growth and investment in the sector. Download our Top 104 Hotel Market Insights Reports: https://lnkd.in/gP3tpHVN Newmark Valuation & Advisory Newmark

3

DD|HA 2024 Q2 Hotel Industry Update – Hope for the Best, Prepare for the Worst As I have stated before, I expect the U.S. Hotel Industry is heading for unsettling economic conditions. On April 3rd, I posted DD|HA’s U.S. Hotel Industry Update for Q1. In that update and subsequent Linkedin posts, I expressed that the U.S. hotel market was heading for an extended economic downturn. I also shared that it was very unlikely that U.S. hotel occupancy will increase in 2024 as most forecasters predicted [at that time]. In June, the hotel industry forecasters issued revised forecasts reflecting a decrease in occupancy and moderated ADR growth for 2024. Unfortunately, macroeconomic conditions in Q2 have shown further deterioration. While April and May hotel demand was positive, preliminary weekly STR releases indicate that June and the first week of July were flat to down. Slowing demand will put downward pressure on ADR growth. Factors impacting hotel demand growth… U.S. unemployment [rate] has ticked up again this month to 4.1% and is expected to increase as layoffs continue. The Sahm Rule holds that when the unemployment rate rises at least 0.5% above the YoY [3-month average], a recession has begun. Following the July increase to 4.1%, the latest Sahm Rule indicator is at 0.43%. GDP growth moderated in Q1 to 1.4%, down from the 3.4% in Q4 2023. On July 10th, GDPNow adjusted the Q2 GDP forecast to 2.0% from a June 26 forecast of 3.0%. A wave of commercial debt is set to mature in H2 2024 and 2025, as interest rates remain high. It was also announced this week that consumer credit rose to $11.7 billion in May, above the $8.0 billion dollar estimate and the $6.5 billion in prior month. These factors, coupled with the employment situation, will certainly put pressure on single-family home loans and the overall banking industry. These economic patterns are eerily similar to the trends leading up to the GFC… an increasing unemployment rate preceded by a slowdown in hotel demand, slowing GDP, accelerated layoffs and a [looming] banking crisis. Hoteliers should brace for the impact to hotel demand beginning in H2 2024 and throughout 2025. Given these facts, I felt it was important to provide the hotel community with a forecast that is quite different from the others. The 2024 DD|HA forecast shows a much bleaker outlook with RevPAR growth expected to be at or near 0.0% for 2024. Our 2025 forecast represents a “what if” scenario. What would happen to occupancy, ADR, and RevPAR if we transposed the same monthly YoY “decreases” in demand and revenue that the industry experienced in 2009 during the GFC? Learn from history…prepare for the worst. #DDHA #sahmrule #Hotels #GDP #Unemploymentrate #Greatfinancialcrisis #GFC https://lnkd.in/eYztMnGc DD|HA U.S. Hotel Market Forecast for 2024 and 2025 (What if scenario)

13

2 Comments

Lower Hawaii Hotel Occupancy with Higher Revenue is Good News for some: The Hawaii Tourism Authority releases its latest report on hotel occupancy in the Aloha State. SOURCE: Lower Hawaii Hotel Occupancy with Higher Revenue is Good News for some BY: eTurboNews | eTN #travelnews

1

March 2024 brought a fresh wave of optimism to San Diego's hotel sector, showcasing a 2.3% increase in room nights sold compared to last year—a solid performance bringing in over $316 million in revenue! However, this surge only partly undoes the damage after a challenging start to the year, marred by unseasonable weather that dampened early 2024 forecasts. Despite March's uptick, weakness in January and February prompted a modest downgrade to future projections. We've adjusted our room demand expectations slightly lower for 2024 through 2026, anticipating a full recovery to 2019 levels a year later than initially expected. Yet, the resilience of San Diego’s hospitality scene cannot be understated. In 2023, our city achieved the third-highest occupancy among the top U.S. markets! Looking ahead, we're observing cautious optimism. Although room night demand still trails behind pre-pandemic highs, signs of recovery are evident, especially in the leisure segment, which has nearly fully recovered from the pandemic. However, the path to a robust rebound in Group sales, particularly among mid-scale and economy properties, points to 2026. As we continue to navigate a landscape shaped by economic pressures and evolving traveler preferences, staying agile and informed will be key to harnessing potential growth opportunities. Let's discuss how these insights can shape the future of hospitality and travel. How is your business adapting to these changing dynamics? #HospitalityIndustry #SanDiegoHotels #TravelTrends #MarketInsights #STRdata https://lnkd.in/g4WWXR4M

21

2 Comments

Investors' strong preference for resorts, combined with the expected revenue per available room (RevPAR) growth in urban locations due to the rebound in international travel and the meetings and events sector, showcases the promising opportunities in both leisure and business hotel markets. This trend highlights the potential for balanced growth across different types of properties, making it an exciting time for diversified investments. https://lnkd.in/ggV-gcDG

9

1 Comment

In just a little more than a year the AICPA is finally getting religion after raining fire and brimstone on anyone who dare suggest what has become obvious ...the 150 credit hour requirement added nothing to the profession and was a colossal mistake from the beginning. This was not a case of government overreach, rather the AICPA and the major firms actively championed this legislative change to add a full year of college to be a CPA .They own the mistake and they own rapidly fixing this vs blaming a mobility issue they created as an excuse for continuing bad policy. Nearly every CPA in America over the age of 50 (myself included) has the exact same educational & professional requirements (120 credit hours) as is being proposed - all of us were grandfathered in with full mobility. It really shouldn't take years of study to propose legislation to quickly provide that same mobility. At our best, CPAs ask the hard questions and force our clients or companies to address facts- especially financial facts. We also point out that the longer a solution is delayed, the more painful the consequences Unfortunately, the leadership of our profession does not subject itself to the same level of scrutiny. The storm clouds associated with the 150 credit hour requirement have been visible for many years As the number of accountants continued to decline over the last decade the profession's leadership looked around for any other solution rather than the obvious: the added cost of $50 to $100 thousand or more in lost wages and higher tuition drove away new accountants. The sad irony here is that you really don't need to be a certified public accountant to figure this out. Years of neglecting this underlying cause are the reason why the profession is seeing a huge drop off in new accountants. It's past time to act. https://lnkd.in/e47YSePh

11

3 Comments

Key takeaways from the Lodging Industry Investment Council survey: 1. Most respondents expect transaction volume to rise this year, but few expect it to increase more than 10%. So much for the year transaction volume roared back. 2. A total of 63% of investors prefer upper-upscale and upscale assets, while 78% expect extended-stay and upscale select-service development to lead the way in the next two years. It's clear the winds in the hotel investment space have shifted toward these specific products. 3. Nearly two-thirds of investors believe corporate will fully recover (!!) to pre-pandemic levels and three-quarters believe group demand will see the fastest RevPAR growth this year. Both trends match what we are seeing on the ground in Partners Hospitality Fund I. Bottom line: the market is still dislocated. Short- and medium-term fundamentals for hospitality look good, but multiple factors are making transactions tough to come by. Groups like Partners Capital who are able to come to terms with buyers on realistic pricing, secure debt, and offer certainty of closing will have a head start on the rest of the pack when transactions finally return. And a head start now means greater, more consistent returns over the long-run. Reach out to our team today to learn more. #partnerscapital #hospitality #hotelinvestment

23

1 Comment

Pricing transparency without hidden mandatory junk fees. Does this apply to restaurants too? New California proposed law (SB 1524 ) says “No!” Can this be right? For over 20 years, consumers have complained about hidden fees. California’s new “Honest Pricing Law” (SB 478) requires businesses to include all mandatory charges in advertised prices, but a new bill (SB 1524) proposes an exception for restaurants. Mark S. Adams, JMBM partner and senior member of JMBM’s Global Hospitality Group®, has written a blog on the subject here: https://lnkd.in/gje6GvbU For more articles on junk fees, see: 🔗 California bans Junk Fees as of July 1, 2024. Good bye to junk fees, resort fees, mandatory service charges, and drip pricing. Hello to – the fruits of SB 478: https://lnkd.in/gMZf3GQA 🔗 FTC’s proposed rule will end drip pricing and junk fees for hotels, restaurants, and many other businesses. Goodbye to resort fees, destination fees, service charges and other miscellaneous fees?: https://lnkd.in/gnFT7Ab4 🔗 Disclosing Mandatory Resort Fees – What Hoteliers Need to Know: https://lnkd.in/gUnavXa2

5

Extra Hotel Fees at Los Angeles Area Hotels In today's daily check-in with Russell of Hotels, the focus was on the various extra fees that guests might encounter when staying at hotels in the Los Angeles area. These additional charges, often not included in the initial room rate, can significantly impact the overall cost of your stay. Here are the key points discussed: Parking Fees: Self-parking typically ranges from $20 to $40 per night. Valet parking usually ranges from $40 to $60 per night. Example: InterContinental Los Angeles Downtown charges $53 per night for valet parking. Resort Fees: Cover amenities such as pool access, fitness center use, and Wi-Fi. Typically range from $25 to $45 per night. Example: Fairmont Miramar Hotel & Bungalows in Santa Monica charges a $35 daily resort fee. Amenity Fees: Include services such as bottled water, business center access, and more. Typically range from $15 to $35 per night. Example: W Los Angeles – West Beverly Hills charges an amenity fee covering daily bottled water and enhanced internet access. Housekeeping Fees: Charged for additional cleaning services during the stay. Typically range from $20 to $50 per cleaning service. Internet Fees: Some hotels charge separately for high-speed internet access. Typically range from $10 to $20 per day. Early Check-In/Late Check-Out Fees: Additional charges for checking in early or checking out late. Typically range from $20 to $50 depending on availability. Specific examples of destination fees at local hotels were also highlighted: The Shay, Culver City: Charges a destination fee of $30 per night, covering Metro passes, Lyft service, and fitness center access. Hotel Figueroa, Downtown LA: Charges a resort fee of $25 per night. Hotel Indigo, Downtown LA: Charges a resort fee of $20 per night. Understanding these potential extra fees helps travelers plan their budgets better and avoid surprises at check-out. For more details, always check with the hotel directly or review your booking information - roh

7

1 Comment

✨DAILY SPARK✨ Simplify to Amplify! 🌟 John M., Regional Manager of a high-end restaurant organization, struggled to keep his team engaged during meetings due to overly complex explanations and industry jargon. This led to disengagement and missed key points. Performance was low and avoidable mistakes were often made. Through our coaching sessions, we focused on simplifying his communication. He learned to distill complex ideas into clear, concise messages and use relatable examples. By engaging his team with straightforward language and interactive elements, he kept them focused and interested. The result? Improved engagement, better retention of key information (higher performance), and a more motivated team ready to elevate the dining experience. Effective leadership starts with clear communication. Cut through the noise and connect with your team on a deeper level. 🚀 👉🏼 Visit my website or DM me to learn more about how my coaching approach for organizations and individuals can make a significant impact! https://lnkd.in/gVYZGA9 –––––– #coaching #leadership #business #coach #growth

5

2 Comments

Channel diversification can be an excellent strategy for mature full service restaurant brands! How could hotels help you grow?

5

2 Comments

Joanna Fantozzi Nation's Restaurant News reports - "The former Walk-On's Sports Bistreaux CEO will now head the new full-service restaurant arm of Hargett Hunter Capital Management, LLC" "Private equity firm Hargett Hunter announced the appointment of Scott Taylor as CEO of the company’s newly created full-service restaurant group, Cherry Bounce Hospitality. Taylor previously worked at Walk-On’s Sports Bistreaux, where he spent 14 years at the company, first as president and COO, and most recently as president and CEO—a position that he held for eighteen months until last June. In his new role, Taylor will oversee the full-service brands under the Cherry Bounce Hospitality umbrella, including Trudy's Tex Mex, Cajun Steamer Bar & Grill, Marugame Udon USA, and @Live.Eat.Surf Restaurants, and will build out the full-service portfolio under Hargett Hunter. The company is actively seeking more acquisitions and is currently in discussion with other brands to join the fold soon. “I’m excited to join the Hargett Hunter family in this important leadership role as we focus on strategic expansion with our newly created restaurant platform,” Taylor said in a statement. “I believe the right culture attracts the right people and creates special opportunities. I aligned quickly with the Hargett Hunter team on a shared vision and strategy to build best-in-class teams and partnerships across the full-service restaurant space.”  Hargett Hunter has invested in nine restaurant brands total. In addition to the four current restaurants in its portfolio, the company has also invested in Stacked, bellagreen, Chop Shop, Chopt, and Bojangles'​ Restaurants, Inc.. The purpose of creating Cherry Bounce as a hospitality platform is to “support the leadership teams of the regional casual dining brands” to “achieve their respective growth, profitability and operational goals.” “The opportunity to successfully scale authentic, differentiated and approachable restaurant brands has never been greater,” said Brock. “Scott’s presence allows us to stack the deck to enable our brands to reach their full potential. His passion for hospitality and incredible track record of driving growth will help us continue to realize the vision for building the strongest growth brands in the industry.” https://lnkd.in/grXJmTSf #QSR #Entrepreneur #Restaurants #Franchise #Franchising #FranchiseChat Chainformation Altir Industries, Inc. Franchise Pipeline Franchise Development Outsource Ned Lyerly Joe Caruso Michael (Mike) Webster PhD Anders Hall Jonathan Martin Michael Scherr

21

8 Comments

A Chef's Reflection: Reimagining America’s Hospitality Industry After a quarter-century behind the stove, I've come to realize our industry’s vibrant surface often masks a complicated history. It's no secret that we're rooted in traditions that stretch back to the days immediately following the abolition of slavery—a time when business practices were developed that still impact how we operate today. My journey through kitchens across the country has shown me the deep-seated issues we face, and why embracing equity might just be the key to our future. When slavery was abolished, the hospitality industry was one of the few places the newly freed could find work. Unfortunately, this transition didn't equate to economic freedom. Business owners, looking to capitalize on the situation, often paid these workers next to nothing, encouraging patrons to tip instead of providing real wages. This practice kept costs low for employers and left workers at the mercy of customers’ generosity—or lack thereof. Tipping has become a cornerstone of our industry, but it’s a flawed one at best. I’ve seen firsthand how it creates uncertainty for our teams. Their income varies wildly with shifts, seasons, and the economy. More than that, it perpetuates a power imbalance, not only within the internal staff, but where staff must tolerate poor treatment or discrimination to earn a decent night’s tips. It’s an outdated model that was questionable from the start and certainly doesn’t belong in our modern world. The pandemic was a wake-up call for many of us. We saw long-time colleagues leave the industry for good, driven away by the instability and lack of support that came sharply into focus during the crisis. The staffing shortages that followed weren’t just a temporary hiccup; they highlighted how fragile our system is under the current wage models. It's time for a change. Though I’m no expert on labor laws or economics, I believe moving away from the tipped wage system could stabilize the industry. A standard, livable wage might be what we need to keep skilled workers and ensure they can invest in their roles without worrying about making ends meet. We owe it to our teams to provide security and respect, and it's clear this change could be beneficial for everyone—staff and patrons alike. I’m just a chef—not a historian, not a politician. But after 25 years in this business, I know our industry needs to evolve. We need to address the roots of our practices and work towards a more equitable environment. This isn’t just about doing what’s right; it’s about setting up our industry for long-term success. As we look to rebuild and grow post-pandemic, let’s build on a foundation of fairness and respect. It’s high time we all move forward together. Reflecting on these issues isn't just academic for me—it's personal. I’ve called myself crazy to even think about opening a restaurant. I’ve called myself selfish to not even try. Sometimes you have to be the change you seek…

10

2 Comments

Take a look at Steven Shapiro's article in HOTELS magazine on the diverse career paths within the hospitality industry, emphasizing the importance of education in preparing students for success. The evolving nature of hospitality curricula, student interests and industry demands, and the significance of soft skills coupled with technical knowledge... https://lnkd.in/eqqATmWG

11

I was hoping to find Cooper's Hawk Winery and Restaurants in Northern CA on the restaurant locator - their homemade bread and butter is simply irresistible, and I don't know how long I can go without it😅 Check out my Yelp review: https://lnkd.in/gsZQYpsa #restaurants #foodcritic #hospitality #foodandbeverage #bonvivant #culinary #foodreview #restaurantreview

1

This is a good read to learn about H2-A and H2-B legislatiin to assist with the long term trend of staffing shortagages my hospitality friends.

2

We recently shared our webinar about #investing with an #IRA, and you can watch it at any time even if you missed the live event. I thought I'd share it here today in case anyone wanted to learn more about tapping into the booming hotel investment industry. There are so many incentives and opportunities to be captured in hospitality at present, but getting the right information is the first step - which is what we're offering! #HotelInvesting #Hospitality #Travel

2