When Will the Recession Hit?

Hotel experts at ALIS this week debated when the next recession would strike. Most panelists on the Boardroom Broadcast, Episode Two panel believed that 2019 would not be the year of the recession, however, some thought that the recession would hit in the fourth quarter when new hotel development would outweigh supply. The panel included moderator Chip Rogers, president and CEO of American Hotel and Lodging Association; and speakers Geoff Ballotti, president and CEO of Wyndham Hotels and Resorts; David Kong, president and CEO of Best Western Hotels and Resorts; Rob Palleschi, CEO at G6 Hospitality; Champ Patel, CEO at Champion Hotels.

“Not in 2019,” Ballotti said on the panel when asked when the next recession was coming. “I love the projections. “I don’t think we are going to see a slow down in 2019.” Ballotti quoted projections including 2.7% RevPar growth and 2.9% midscale growth. While he was very bullish on the year ahead, Patel disagreed that it would be a strong year in 2019. He expects the recession to strike in the fourth quarter of 2019 when, he says, supply will outstrip demand.

Kong, on the other hand, took the middle, saying that he sees validity to both sides. “I think that both are right, actually,” he said. “This is going to be a hard few years. We have had good run of RevPar growth, but historically if you look at downturns, supply grows faster than demand.” He added that what happened in December in terms of the market volatility was “disconcerting,” however, we seemed to have recover. Still, he said, “There are also early warning signs that we should pay attention to.”

Palleschi ended the recession talk on a high note, saying that he was encouraged by the current economic conditions, which include all-time low unemployment and wage growth.

Even the most bullish of the panelists, however, agreed that there were significant obstacles facing the industry. The biggest among them is labor shortages. Ballotti said that the hotels industry is 900,000 jobs short. “We have a supply shortage. We it comes to finding those jobs, it is the biggest issue that everyone in this room should be focused on,” he said. Some of the ways hotel owners are attracting talent is to provide free college education and canvasing the most in-need cities to fill positions.

Kong agreed, saying, “Labor is the most pressing challenges that we face.” He said that the solution to the problem is for the industry to do a better job of showing the career opportunities and upward mobility. “We need to all do our share that this industry offers career progressions,” he said. “There are great success stories, and this industry provides great career opportunity.” He added that another solution is to adjust compensation to attract workers. “We have to reconsider how we attract people, and we maybe have to rethink our compensation scheme,” he said.