### Dive Brief:
– **Budget Hotels Hit Hard:** As U.S. RevPAR (Revenue per Available Room) growth slows, budget-friendly hotels and those in leisure-focused markets were the most affected in Q3 2024, according to JLL’s Q3 U.S. Hotel Investment Trends report, shared by Hotel Dive.
– **Stagnating Growth:** While year-to-date RevPAR was 14% higher than 2019 levels, growth has plateaued, increasing by just 1% compared to 2023. JLL attributes this slowdown to a decline in domestic leisure travel and reduced consumer savings.
– **Winners in the Market:** Luxury hotels and those in urban areas saw more growth, driven by a recovery in international, corporate, and group travel. Additionally, recent Federal Reserve rate cuts have sparked “cautious optimism” in the market.
### Dive Insight:
– **Economy and Midscale Hotels Struggle:** Compared to 2023, economy hotels saw a 3.4% decline in year-to-date RevPAR by Q3, while midscale hotels experienced a 1.2% drop. In contrast, luxury hotels managed to grow their RevPAR by 1.4%.
– **Profitability Challenges:** Rising labor costs continue to weigh on profitability, with upcoming union negotiations in major markets expected to add further pressure on hotel owners. Unionized hotel workers in California, Massachusetts, and Hawaii have secured higher wages amid this year’s widespread hotel strikes.
– **Labor Costs on the Rise:** Earlier this year, the American Hotel & Lodging Association predicted that U.S. hotels would increase employee wages by 4%, as employment in the industry remains below pre-pandemic levels.
– **Potential for Increased Transactions:** JLL anticipates that lagging profitability could lead to more hotel transactions in the coming months, as financially strained owners face high debt costs and property improvement expenses.
– **Transaction Volume on the Rise:** Q3 saw an increase in transaction volume for the third consecutive quarter, driven by large deals such as Hyatt’s $1 billion sale of the Hyatt Regency Orlando, Gencom’s $300 million acquisition of the Thompson Central Park Hotel, and Host Hotels & Resorts’ $265 million purchase of 1 Hotel Central Park.
– **Year-to-Date Transaction Data:** As of Q3, there were 481 total hotel transactions, amounting to $15.4 billion in transaction volume. This represents a nearly 30% increase from 2019 levels but a 20% decline compared to 2023.
– **Top Markets for Transactions:** New York City led the way with $1.6 billion in transactions, followed by Orlando, Florida, with $1.2 billion, and Phoenix with $1 billion.
– **Impact of Fed Rate Cuts:** Recent Federal Reserve rate cuts could further boost transaction volume, though JLL notes that more clarity is needed for liquidity to significantly increase.
– **Outlook for Hotel Investment:** Speaking at the Lodging Conference, JLL Hotels & Hospitality Group CEO Kevin Davis likened the future of hotel investment to a “boulder at the top of a hill.” He expects the transaction market to start slow but gain momentum and speed as it progresses into next year.
Source: hoteldive.com