Key Takeaways:
- Capital Markets
Interest rates and credit spreads are now below 2019 levels.
Interest rates dropped below pre-pandemic levels in May to 6.8% from 6.9% in May 2019, and credit spreads narrowed to 320 bps from 445 bps in May 2019.
The number of hotel loans originated has dropped Y-o-Y.
As credit conditions have tightened, the number of loans originated has dropped precipitously in May to 23 from 98 in May 2022.
The pace of transactions declined in Q2 2023.
Overall transactions volume dropped in 2Q for both limited- and full-service assets. Limited-service asset pricing rose 2.1% Y-o-Y, while the price for full-service assets dropped 16.9% Y-o-Y. - Current Trends
International travel continues to improve in May relative to 2019.
Despite growth being slower than anticipated, travelers from China and Japan are likely to fuel increases in hotel demand going forward.
Chain scale and independent RevPAR performance diverge.
RevPAR for chain scale hotels increased 3.8% year-over-year in May compared with a 3.8% decline for independent hotels.
Office attendance remains in a tight range.
Office attendance varies by city, with San Jose and Los Angeles remaining below the national average of 50% and Houston rising as high as 61% in June. - Food for Thought
Wage growth has the potential to fuel additional travel spending.
Future lodging demand is likely to be driven by the drop in airfares coupled with wage growth in excess of RevPAR growth.
Margins remain under pressure except for extended-stay.
Extended-stay gross operating profit dollars increased 6.2% year-over-year in April, outpacing total revenue growth of 5.3%, making it the only segment to experience Y-o-Y GOP margin growth.
Short-term rental share of demand continues to improve.
While short-term rental demand share rose in May, occupancy declined year over year, suggesting that supply growth is currently outpacing demand.
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