Maturation of the Hotel Industry Drives Convergence with Other Sectors to Facilitate Growth

by CBRE | Jan 09, 2024

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Key Takeaways

As the hotel industry matures, unit growth slows, costs increase and competition for guests becomes more challenging, driving higher same-store sales becomes an important avenue for increasing returns on investment.

To drive higher same-store sales, hotel brands and owners will need to expand services to existing customers or attract new customers beyond traditional business and leisure travelers and engage them beyond their typical peak travel years (early 30s to late 50s).

We expect hospitality companies to partner with residential real estate companies to create trusted and amenitized living options like student housing, co-living, senior-communities and vacation homes.

For guests, these partnerships can enhance trust given the backing of large, globally recognized brands and increase geographic and contract length flexibility. They also provide travelers with opportunities to earn and use points in all phases of life and for all travel needs.

For the partners, the benefits are numerous. Hotel C-corps have lower costs of capital, more free cash flow, and easier access to financing; they often offer mezzanine loans or “key money.” Hotel brands bring clout, trust and reputation and more than 680 million loyalty and alliance members to whom hotel companies can cross-market.

By partnering with companies in new industries or sectors, which may have different cyclical or secular trends, hotel companies can enhance diversification, improve returns on existing assets, extend growth, and enhance their competitive moat.