The leisure and hospitality segment of the economy saw zero job growth in February, which had the weakest job gains in over a year. The jobs report released last week is just one of the latest signals that the hospitality industry may be slowing down.
Commercial real estate financing for hotel properties dropped 25% in the first nine months of 2018, more than for any other major property type, CrediFi found in a report on hospitality lending trends released today.
Other factors also point to a decline in the hospitality segment, including lower hotel occupancy growth in 2018 and projections by market data firm STR that there will be less hotel transaction activity in 2019, when occupancy will be flat for the first time since 2009.
Citing these findings, the Wall Street Journal reported last month that slowing hotel growth could be the worst in 10 years.
“Now demand is softening, and although supply growth is stabilized, we expect our first year without an increase in occupancy since 2009,” Amanda Hite, CEO of STR, said earlier this year.
“Combine more pressure on occupancy levels with already subdued pricing confidence, concerns over labor costs, a cooling economic environment, and the negative sentiment brought on by the recent government shutdown, and you have a recipe for diminished RevPAR growth,” she said, referring to the hotel performance metric of revenue per available room.
Although the hospitality segment is the smallest of the major commercial property types, it may well have outsize significance, with some viewing the state of the hospitality industry as an early signal showing where the overall U.S. economy is headed.
Economic growth has gotten a bit sluggish over the past few months, and it goes beyond the jobs figures. As of December, U.S. personal income has dropped for the first time in more than three years and consumer spending has fallen the most since 2009. In addition, trade disputes continue to cast a pall over the U.S. role in a global economy.
“The reality is the economy is slowing,” Torsten Slok, chief international economist at Deutsche Bank, told the Washington Post. “The question now is whether it’s slowing for reasons associated with the trade war or because the rest of the world is slowing.”
In turn, the Wall Street Journal reported, slowed U.S. economic growth, trade tensions and rising hotel labor costs “could also weigh down the hotel sector’s growth.”
Find out who’s financing hospitality properties. Download CrediFi’s hospitality report to learn more about U.S. hospitality trends and lenders.