The world certainly is not falling. This is simply trying to make the three points of an overall thesis:
1. Unique Undersupply Condition: Covid canceled many projects and hospitality is now undersupplied and existing properties have had underinvestment.
CONCLUSION: Rates for hospitality and especially upgraded properties should have strength
2. More Stringent Lending Conditions: Some traditional commercial lenders, specifically local and regional banks, have been pulling back and tightening their lending
CONCLUSION: Asset prices are under pressure as required refinances over the next 18 months push owners to accept less favorable terms or give up equity to private real estate lendors
3. Strong Long Term Trends: The shift to the experience economy continues. Millennials prefer spending on experiences and there is a general shift away from 'things' to living life in a broader way with Instagram selfies
CONCLUSION: Travel and leisure growing at twice the rate of GDP is intact as the longer term trend
A counter point to these three favorable points is that short-term (urban) and vacation rentals (destinations) have taken market share away from hotels and this appears to be a permanent trend. Groups are choosing large short term rentals over renting multiple hotels rooms when they present a value and experience that is compelling.
So the THESIS is that the next 18 months present a unique opportunity to buy into hotel property when the prices are distressed in the short-term but the industry has great long-term trends.
What research have you found to support or dispute this thesis?
