SYgle>Industry Information>LIIC: As GDP goes, so goes the US hotel industry

LIIC: As GDP goes, so goes the US hotel industry

Column: industry Tag: US hotel industry,hotel industry,politics Published: 2017-06-23 15:57 Source: Author:

Rockbridge Capital’s Chris Diffley talks at the most recent meeting of the Lodging Industry Investment Council as RLJ Lodging Trust’s Kate Henriksen looks on. (Photo: Stephanie Ricca)

NEW YORK—Many hoteliers try to remain, at least publicly, apolitical, but that doesn’t mean politics don’t affect their businesses.

Asked whether President Donald Trump will ultimately have a positive impact on the hotel industry, members of the Lodging Industry Investment Council said the jury is still out for a number of reasons.

Robert Leven, chief investment officer for TPG Hospitality, said despite Trump’s personal history in the hotel industry, judging his effect on hotels will likely be similar to most other presidents.

“It’s hugely about (gross domestic product),” he said. “If you look at the charts over the last 60 to 70 years to track hotel demand and output, they track unbelievably closely. As long as supply stays relatively in check and we’re talking about the big picture macroimpacts on the industry, if you have strong GDP and output, you’re going to have strong demand growth in the hotel business.”

Hopefulness in administration

Some members said they’re hopeful the current administration’s promise to be more business-friendly will eventually bear fruit in the form of stronger economic growth and tax reform.

In a quick informal poll of the group, a slight majority of LIIC members (17 to 12) said they believe the current administration would be able to produce GDP growth in excess of 3%.

Mike Cahill, CEO and founder of Hospitality Real Estate Counselors and LIIC co-chairman, said some of Trump’s “America First” policy could be beneficial to the U.S. economy. He noted the $2 billion committed to the Paris climate agreement that Trump has said he will not pay could instead be pumped into the economy instead.

Cahill said it will be great news for hotels if the administration is able to achieve significant GDP growth.

“If the economy does start having 2% to 3% GDP growth by 2018 or 2019, then (today) will have been the bottom of the cycle, which means right now is the best buying opportunity,” Cahill said.

Labor outlook

Sean Hennessey, founder of Lodging Advisors and LIIC co-chairman, said there are reasons to be nervous, as well.

“One issue we’re facing as a nation is we’re running out of labor,” he said. “And there is a lot of anti-immigrant rhetoric (which could affect the labor market). It will create a drag on GDP growth if we can’t address the labor situation.”

Multiple LIIC members pointed to the increasing cost of labor, and difficulties in recruiting and retaining employees, as one of the top issues facing the hotel industry today.

Leven noted the current administration has also done things that might provide relief from a labor perspective.

“Look at what happened at the (National Labor Relations Board) over the last eight years,” he said. “There have been continued expensive and non-pro-business labor decisions that have come down and been crammed through the NLRB. The possibility that could be reversed or changed could provide real relief. If it kept going the way it was going, the cost problems, which are already difficult because of lack of labor supply, would be compounded.”

Andrea Foster, SVP of development at Marcus Hotels & Resorts, said the hotel industry will need to capitalize on the changing labor conditions of other industries to find new pools of potential employees.

“There’s going to be a move to self-driving cars soon, and there are 6 million to 8 million people who make their living by driving,” she said. “We have to think about how we train those people and utilize those who are out of a job.”

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