There are a number of misconceptions floating around the hotel industry about our largest growing demographic, the Millennials. This stems from an overgeneralization of the key trends that they have brought to the forefront of our industry. The Millennials, generally categorized as those born between 1980 – 1995, are a maturing group that prizes the use of technology for efficiency and ease of doing business.
The first half of 2016 included a bit of a negative impact from China’s economy, some terrorism events and a softer than predicted first half in terms of financial performance. Here is a primer on where we are in this noble institution of hospitality as of the 2016 midpoint.
At Woodstock, Neil Young got up to the microphone and said, “this song starts out slow and fizzles out altogether.” Well, this year started out slow but it will not fizzle out. Contrary to those pundits who feel the party is over, 2016 will continue the trend line of 2015 albeit with a somewhat muted feel and as mentioned, a slow start. This summer will jump with average rate growth due to unprecedented leisure demand stimulated by low gasoline prices and that American mindset: “It is my birthright to travel and visit my friends and family!”
This is one man’s opinion. I am an Independent, so Democrats and Republicans alike will disagree with me. I am not a member of the Lodging Industry Association or the San Diego Hotel Motel Association, so I am not privy to their positions on these issues and many of them will disagree with me. Lastly, I do not own any land or property downtown that would give me any reason to prefer a certain outcome.
2016 is looking to continue the trend line of 2015 albeit with a somewhat muted feel. While average daily rate growth (ADR) will be a solid 4.5 percent, occupancy levels look to remain relatively flat, up just one half of one percent with demand outpacing supply 2.2 percent to 1.7 percent according to Lodging Econometrics and STR respectively, so this translates to a 5 percent growth in revenue per available room (RevPAR). Coupled with capital availability and the analytics and trends discussed below, this will be an active and exciting year.
(Updated: May 2016) The challenges of increased health care costs, minimum wage increase impacts and new supply are not yet critical for the hotel industry but they will become very important when an economic downturn occurs. Further, Airbnb has become a lightning rod for debate and could become one of those aforementioned factors that pushes hotel industry revenue and net income growth into negative territory. So what can the hotel industry do?
2016 is going to be an amazing year for the hotel industry as we previously forecasted. We have also covered the Top 10 Trends of the year to help us stay ahead of the game. But one of the additional keys to success in the coming year is employee satisfaction. Without a satisfied hotel staff we have no foundation upon which to build.