A funny thing happened on the way to the hotel recovery. Just six weeks ago, everyone in the business thought we were on the road back to prosperity. That was before the debt ceiling debate and the downgrading of U.S. credit.
Since that time, several big transactions in the business were either scuttled (Cerberus & Chatham's proposed purchase of Innkeeper's portfolio) or scaled back (Hyatt's deal with Lodge Works). Ironically, and encouragingly, however, hotel operating performance continues to improve. According to STR, occupancies, ADRs and RevPARs have increased every week for many months. The most recent report, for the week of Aug. 21-27, RevPARs climbed a very healthy 7.8%. Of course, it's troubling that most of the improvement in hotel performance is coming in occupancy, not rate, but in this tenuous economic environment any positive numbers should be celebrated.
It's obvious the hotel industry has always been dependent on the health of the U.S. and world economies. When times are good, business people go on the road and families travel. No revelation there. What's changed in recent years—and even more so in recent months—is how quickly today's breaking news can put a near-immediate brake on the lodging industry, particularly when it comes to acquisitions and development activity. The recent skittishness in the hotel transaction market was a direct and swift reaction to the indecision in Washington and the subsequent fall-out. This is a new reality we all must live with.
However, on a day-by-day basis, and especially if you're in hotel operations, it's foolish to overreact to every headline or latest political skirmish. It's the same advice my financial planner gives me when I worry about the zigs and zags in my investment portfolio: We're in this for the long-run so don't pay too much attention to what happens today, tomorrow or even next week.