Analysts with investment banks are struggling with their 2023 forecasts. Hotel performance remains strong, but economic headwinds are notable. The pictures they paint are worthy of Picasso's "Blue Period," with vibrant images shaded in a somber blue.
Daily Lodging Report
Skift’s Daily Lodging Report is a subscription-required, email-only newsletter read by anyone and everyone in the hotel investor, owner, and operator space, including CEOs of some of the industry’s top brands. It covers North America and Asia Pacific with two separate regional editions.
Here are some excerpts from Daily Lodging Report by Alan Woinski from the past week. If you’re not a subscriber, you should be. Get news on hotel deals, development, stocks, and career moves. Sign up here, now.
Sunday, January 8
Braemar Hotels & Resorts Inc. expects to report occupancy of approximately 64% for the fourth quarter of 2022 with an ADR (average daily rate) of approximately $469 resulting in RevPAR (revenue per available room) of approximately $301. This RevPAR reflects an approximate increase of 8% compared to the fourth quarter of 2021 and an approximate increase of 20% compared to the fourth quarter of 2019. Additionally, for the month of December 2022, RevPAR increased by approximately 26% versus December 2019. In the month of November, RevPAR increased approximately 15% versus November 2019 and in the month of October 2022, RevPAR increased approximately 14% versus October 2019.
Ashford Hospitality Trust, Inc. expects to report occupancy of approximately 68% for the fourth quarter of 2022 with an ADR of approximately $175 resulting in RevPAR of approximately $118. This RevPAR reflects an approximate increase of 25% compared to the fourth quarter of 2021 and a decrease of approximately 1% compared to the fourth quarter of 2019. Additionally, for the month of December 2022, RevPAR was essentially unchanged versus December 2019. For the month of November 2022, RevPAR decreased approximately 2% versus November 2019 and for the month of October 2022, RevPAR decreased approximately 1% versus October 2019.
Skift Note: Ahead of earnings season, company forecasts and analysts predictions are a scattergram so far. Some positive, some neutral, and some pessimistic.
Monday, January 9
Jefferies downgraded both Marriott and Hilton to Hold, leaving only Wyndham, with a Buy rating in their C-Corp coverage. They continue to favor Host Hotels and Hersha Hospitality on market exposures, demand mix and balance sheet strength. Jefferies’ downgrade was based on macro concerns and that with most aspects of the recovery played out and a looming recession, the upside to earnings and valuation for bellwether stocks is limited.
Hilton announced the opening of Conrad Singapore Orchard, its second Conrad Hotel & Resorts property in Singapore, joining Conrad Centennial Singapore. The hotel includes 10 restaurants and bars and 14 event spaces. From now until late 2023, the hotel’s 440 rooms will undergo extensive reinvention and refurbishment and will fully open in early 2024.
Skift Note: See more reports from JP Morgan, Truist, and Baird below.
Tuesday, January 10
JP Morgan gave their 2023 lodging outlook presentation, saying they see the REITs (real-estate investment trusts) as relative underperformers versus the C-Corps. They see Wyndham Hotels and Hyatt Hotels as relative outperformers within lodging, overall. JPM said they see little to no impact from a slowing macro on demand trends, pricing elasticity or meaningful impacts to development pipeline/new room signings. That being said, they forecast RevPAR growth deceleration in 2023 and said these stocks tend to underperform when this happens. They said they could see a rotation out of lodging stocks by investors later in 1Q23 as lodging had been looked at as a good place for investors to hide in.
Barclays said December lodging RevPAR ended on a strong note, very notable after Pebblebrook Hotel Trust’s guidance cut during the month. Barclays said that now looks like it was driven by San Francisco’s softness and idiosyncratic PEB issues rather than an industry slowdown. Barclays expects lodging REITs to be cautiously optimistic on 2023 RevPAR growth when they report 4Q results as leisure pricing is holding in strong, convention demand is expected to increase in 2023 and business transient rates are expected to grow in the the mid-to-high single digits and more businesses return to more normal business travel patterns.
Marriott International’s Courtyard by Marriott brand announced the opening of Courtyard by Marriott Colombo. This is the first Courtyard by Marriott branded property to open in Sri Lanka.
Skift Note: Everybody’s guessing right now. Once earnings officially report, we’ll have a more solid sense of how the last months of the year turned out for hotels and possibly a picture of how many advanced reservations are on the books for early in the new year. See Truist’s comments, below.
Wednesday, January 11
Truist gave its 2023 lodging preview, saying they see a mixed bag for demand/pricing/supply trends for the lodging companies. Similar to the past nine months, they see “macro over micro” at the moment. They see the main driver/wildcard coming from the economic impact of the rising interest rates and inflation. Last year it was mostly about Covid and its variants. They don’t see Covid as zero risk but Truist believes it is now secondary to macroeconomic considerations for most investors and public company executives. Truist said they do see pressure on individual corporate bookings and stagnant pricing. While Pebblebrook Hotel Trust is the only company so far that has called out this concerning trend but Truist feels inevitable acknowledgment will begin to creep into more discussions/earnings commentary going forward with such trends most concerning for the hotel REITs. Forward-looking leisure RevPAR trends continue to be resilient, almost entirely driven by ADR at this point as new competitive supply from short-term rentals and the reopening of international markets such as Europe, the Caribbean and Canada combined with favorable FX or American travelers and the return of cruising are putting some pressure on domestic hotel occupancy. Group trends are the same with the good news being the last-minute booking volumes are strong. The negative is Truist is seeing the outlook more than two quarters out for corporate group business being below levels for 2022 at the same time in 2021. Supply is encouraging and China could finally see their RevPAR catch up to 2019. Truist sees Hyatt as the outperformer from the C-Corps while Wyndham may be the only hotel C-Corp they cover to see positive organic net unit growth percentage increase in 2023. Truist is Neutral to Cautious on the Lodging REITs for 2023. They maintain Buy ratings on PK, RLJ and RHP.
Sunset Hospitality Group has expanded its global footprint to Southeast Asia as it prepares to launch Azure Beach and Attiko in Vietnam. Scheduled to open in Q3 2023, the initiative will be the firm’s fourth Azure Beach location following its success in Dubai and Beirut. A third location is set to open in Doha in Q2 2023. Attiko will welcome its third venue after unveiling at W Dubai – Mina Seyahi in November 2022 and earlier in June in Bodrum. This follows recent funding from Goldman Sachs Asset Management. Both venues will mirror their Dubai-based presence. Azure Beach is on the South China Sea. Constructed by KDI Holdings, a further collection of 168 ocean-view shophouses, luxury villas and 5-star hotels will complete the complex.
The Ascott Limited, a lodging business unit of CapitaLand Investment, announced the appointment of Serena Lim as its chief growth officer. Serena will lead Ascott’s global business development team and will be responsible for steering and managing the company’s growth in management and franchise contracts globally, excluding China.
Skift Note: Everyone will listen closely at the ALIS conference on January 23-25 to hotel executive comments ahead of earnings season.
Thursday, January 12
Baird gave their 2023 Hotel REIT outlook saying they are taking a more balanced approach in early 2023 as macroeconomic risks and growing expense pressures keep them selective. Baird said they see better buying opportunities if/when estimates reset further and more clarity emerges on the fundamental front. They said they don’t need to be too negative as a lot of investors are already there from a sentiment perspective and estimates have been trending lower. Xenia Hotels remains their Top Pick and Apple Hospitality remains a high-conviction Outperform-rated name. Baird downgraded Summit Hotels to Neutral from Outperform. Their price target was cut to $8 from $10. Baird said the downgrade and lower price target reflect reduced earnings estimates, less attractive valuation versus peers, recent acquisitions that have lagged underwriting expectations, and moving pieces/modeling uncertainty related to transactions and joint venture adjustments.
Colliers International said they are expecting hotels in the Philippines will complete some 3,900 rooms, a record high for developers, in 2023. The group expects 2,120 rooms to be built each year between 2023 and 2025, a sharp rise from the 720 rooms a year between 2020 and 2022. From 2023 to 2025, about 44% of the new supply will likely open in the Bay Area, Makati central business district (CBD) and Ortigas CBD. More context from an earlier DLR, here.
STR said Melbourne, Australia’s hotel industry recorded its highest monthly average daily rate on record, according to preliminary December 2022 data. CoStar’s STR, the gold standard for benchmarking hotel performance, said occupancy was 67.7%, while average daily rate was A$236.53 resulting in RevPAR of A$160.22. STR said the ADR and RevPAR levels surpassed the pre-pandemic comparables by 27.2% and 9.1% respectively while occupancy remained below the 2019 comp by -14.3%.
StayWell Holdings is expecting a big 2023 in key growth regions. The medium to long-term expansion strategy will include setting up 250 hotels across the destinations such as Bangkok, Singapore, and Saudi Arabia. The company will add its luxury brand – The Prince Akatoki to the UAE, where it already has four hotels. The expansion project is expected to be completed by 2032 and will focus on an asset-light model for growth and a major portion of the portfolio will be managed directly by the group, reported the Economic Times in India. The group recently signed a new hotel brand named Park Proxi in Egypt. The first hotel under the Park Regis brand banner, Park Regis by Prince Deira Islands, was signed in Dubai, expected to open by the second quarter of 2023.
Skift Note: Note all this growth even when China’s international outbound tourism hasn’t resumed yet.