You don’t need to read this. You already know things are bad, but we thought we’d offer you the chance for further depression. Not only are airlines in sagging shape, but hotels, no pun intended, are as well. After a three- or four-year run in which hotels could charge pretty much anything they wanted, the US lodging industry is reversing course. A research firm called Lodging Econometrics says, “Guestroom demand has turned negative, resulting in significant declines in occupancy … and putting considerable pressure on room rates. This is causing many developers to retreat to the sidelines to await a bottoming in economic conditions and a thaw in the lending environment. As a result, project cancellations and postponements are at trend-line highs, while new project announcements are well below previous cyclical peaks.”
It’s important because the hotel pipeline is a very different animal from the airline capacity outlook: airline mangers can take planes out of service quite rapidly, as they demonstrated in last year’s decline,
but when the guys who put up the big bucks to put up lodging put off putting things up, it means that their smart money is betting on a downturn that has no near-term upside. If you didn’t follow that, it means that, in a word or two, things is bad all over. The chart here, from Lodging Econometrics, shows only one increase – in project cancellations.But don’t take their world for it. PKF, a respected hotel consulting firm, says things are so bad that significant numbers of hotels won’t be able to meet their debt service.