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Why Is Anybody Surprised?

At the Lodging Conference closing session in 2015, I made the statement that the party was over and owners should talk to their broker about selling.…

By Joel Ross | Updated on November 13, 2017

Joel Ross

At the Lodging Conference closing session in 2015, I made the statement that the party was over and owners should talk to their broker about selling. It seemed obvious that occupancy had risen to its possible high, and that ADR had risen to a point that there would be price resistance given that guests can now compare prices easily online, and brand loyalty is being diminished by the huge proliferation of new sub brands. The recent CBRE paper that says the industry was surprised by the failure to meet budget in 2016, and likely in 2017, seems to simply prove the point that the hotel industry lives in a world of its own of overoptimism and pundits who are reluctant to be the bearers of reality.

On average, there is a maximum practical occupancy that hotels can achieve no matter what the demand. Most markets are not New York where occupancy can be over 80% on a consistent basis. Most locations do not have the international and national tourist inflow year round that New York has. So, to assume that occupancy can just keep rising is simply ignoring reality. There is also a clear failure to recognize that, just as happened with Amazon and retailers, there is now the ability for consumers to compare price value on hotels, and to make simple choices based on price.

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