Hoteliers see interest-rate increases

The Federal Reserve recently raised interest rates again by a quarter percentage point to range between 1.25% and 1.5%. The general response from the U.S. hotel industry has been a collective shrug.

Fed officials have indicated plans to continue increasing rates incrementally a few times each year. But, with rates still historically low, hoteliers are taking each increase in stride.

In comparison with previous years, lower interest rates are contributing to a lending environment that continues to be favorable for refinancing and buying properties, said Mike Hines, president and CEO of HP Hotels.

With each rate increase, construction financing and acquisition costs will go up and profitability will be lower, he said. But he doesn’t expect the latest increase to affect his company at its current transactional level, he said. Coupled with U.S. tax reform, the rate hike might accelerate the sale of assets, he said, from a purchase pricing perspective.

“At this point, I wouldn’t call it unfavorable,” he said. “I’m not so worried about slight increases in interest rates that have occurred or will occur in the future. I’m more concerned about labor rates.”