As guidance shrinks, overall optimism shouldn’t
As guidance shrinks, overall optimism shouldn’t
01 NOVEMBER 2019 7:22 AM

With a tepid near-term outlook for the hotel industry, it’s possible that both the optimists and pessimists are right, at least for the time being.

One of the most predictable things in the hotel industry today, where growth has been reliably tepid to bad, is if you get one of the major brand company CEOs on stage at a major conference or on camera for some major business news outlet, particularly Arne Sorenson, and you ask about how they feel about the growth of travel, you’ll get the same broadly optimistic answer.

The global middle class is larger than it’s ever been and it continues to grow each day. Generational shifts make people more interested in spending their money on experiences rather than things.

The macro trends all point up for travel and hospitality.

And yet the causes for optimism in the short term are in short supply.

So far in this early portion of the third-quarter earnings season, companies like Hilton, Hyatt Hotels Corporation, Wyndham Hotels & Resorts and Accor have all had some level of downward revisions for their full-year guidance, and signs are not pointing to a much better picture in 2020.

When I spoke to analysts a couple weeks ago in preparation of the earnings season, the takeaway was clearly there is little to no hope in the near term that the industry will have anything happen to shake it out of its aging-cycle funk.

But at a point like this, it’s important to remember that both the long-term optimism and short-term pessimism can be (and I believe are) well founded and grounded in reality.

Real estate investment trust executives love to point to the fact that their portfolios are undervalued from a stock perspective when compared to how assets trade on the private markets. This often comes off as a defensive argument that is unlikely to move investor sentiment, but it’s also true in many cases.

Brand CEOs often point to strength overseas while U.S. growth is tepid and their pipelines are strong while revenue per available room flat lines. Once again, this is them looking on the bright side, but they’re not wrong.

The hotel industry is at or near the end of its exceptionally long cycle. But the sky isn’t falling. New opportunities will come, and the industry will continue to grow, even if that growth doesn’t always come when you want it.

What do you think? Let me know via email or on Twitter.

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