Cautious optimism for the hospitality sector. That’s the theme of the latest research report from LightBox.
LightBox, a provider of due diligence, risk management and workflow solutions for the commercial real estate industry, recently released its second quarter 2021 Investor Sentiment Report. And the good news from the report? Investors and their advisors are seeing promising economic indicators that could help speed the recovery in the U.S. hospitality sector.
This doesn’t mean, though, that this sector doesn’t have a long way to go before hitting 2019 levels of investor interest. The COVID-19 pandemic devastated the hotel business. And hotel owners are still waiting anxiously for business travelers to return. Until they do, the hospitality industry will struggle.
“The commercial real estate industry is skillfully navigating a complex set of challenges while at the same time seeing many positive signs of recovery and renewal at mid-year 2021,” said Tina Lichens, senior vice president of broker operations for LightBox.
“The hospitality sector is poised for continued growth and transformation yet is also the most vulnerable to continued upsets as the market stabilizes and investors make decisions about which asset classes can deliver strong long-term returns.”
The sentiment report found that markets across the Midwest are seeing jumps in hotel employment. That’s a good sign for the industry. According to the Bureau of Labor Statistics’ research for May of 2021, leisure and hospitality employment grew during the past year by 58,600 in Minneapolis-St. Paul, Minnesota; by 20,100 in Milwaukee, Wisconsin; and by 11,100 in Des Moines, Iowa.
Hotel industry experts are already seeing a strong summer leisure travel season. All those summer road trips are helping the industry.
That’s the good news. The bad news? Business and convention travel is still way down. And this business is more important for the profits of a huge chunk of the hospitality sector.
“We have to be careful,” said Vamsi Bonthala, chief executive officer and Cofounder of Arbor Lodging Partners, a Chicago-based hotel investment and management firm with hotel investments in Indiana, Minnesota, Missouri and other markets. “We’re not out of the woods yet with the pandemic.”
U.S. hotel occupancy dipped .01 percent to 65.4 percent for the week of June 27 to July 3. Detroit, though, was one of only two markets to see a double-digit increase over figures from 2019. Detroit had a 13.1 percent occupancy increase to 64.4 percent, while Phoenix held the highest spot with a 14 percent increase to 60.2 percent, according to research from STR, a division of CoStar.
Hotel occupancy, a key metric in determining the health of the industry, has grown significantly in 2021, thanks in part to the increased speed of vaccine distribution.
According to LightBox’s report, hotel sales are expected to spike significantly in the second half of 2021, potentially reaching pre-pandemic levels in 2022 and 2023. The report says that buyers will focus first on properties that can benefit from leisure travel, particularly those in driving distance of large population pools.