Despite the Federal Reserve's aggressive monetary policy aimed at controlling persistent inflation, during the first half of 2024, the U.S. economy continued to demonstrate resilience. While strong growth in many subcategories of Gross Domestic Product (GDP) including consumer and government spending, investment, exports, and employment has many optimistic, the economic outlook is tempered by global geopolitical risks including ongoing wars in Europe and the Middle East. Although the U.S. economic outlook remains positive, signs of a softening consumer are mounting within lower-to-middle-income households. And while recession concerns remain, heightened anxiety that the U.S. will experience two consecutive quarters of negative GDP has significantly diminished. Furthermore, an uncertain U.S. presidential election appears to be leading consumers and businesses to curtail spending for the balance of the year.

Through Q2 2024, the U.S. lodging industry is operationally sound, with growth being fueled by corporate transient, group, and inbound foreign travel, while domestic leisure demand continues to wane as Americans continue returning to travel overseas. Group trends remain solid, helping generate a base level of demand that further supports pricing power for hotel operators. While strong and with building momentum, foreign inbound travel to the U.S. remains below pre-pandemic levels. It is interesting to note that since 2000, U.S. presidential election years have seen Real GDP growth decline by 110 bps on average versus the prior year. In each of the past four U.S. presidential election years, both demand growth and RevPAR growth slowed from the prior year. Elevated development costs coupled with restricted availability of construction financing which if obtainable is expensive and continues to diminish the feasibility of new hotel supply, a phenomenon which is anticipated to continue during the foreseeable future. Finally, hotels in several lodging markets including New York City are benefiting from restrictions that have been imposed on short-term rentals, effectively reducing such competition.

Publicly traded hotel companies are leveraging their platforms and loyalty programs to fuel growth, as evidenced by several recently announced acquisitions and/or strategic alliances/partnerships.  Examples include: