This article is designed to include the keys to business planning and development success but there are changes occurring in our industry that require monitoring. These include disruption (is it really disruption or is it innovation?) and changes that have transformed our industry from an art to a science. Before we complete our business plans for 2017, a review of macroeconomic data is in order. China’s growth is slowing, Europe remains suspect due to the Brexit and limited growth signs but we do not anticipate a recession in the U.S. economy in 2017. Despite the economic uncertainty and global terror threats, we believe a soft landing will keep the U.S. slowing to about a 1.5 percent GDP growth rate in 2017.
Horton Plaza served as the catalyst for San Diego’s development in the recent past and it became the anchor for future development. Not only did it impact downtown but it also shepherded a resurgence in leisure market getaways including Mission Bay, Pacific Beach, and La Jolla.
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.