How CFOs are forecasting the financial state of the hospitality industry

Economic and geopolitical environment

CFOs indicated interest rates, recession and the labor market were their top three concerns within the economic and geopolitical environment. The survey also revealed their company’s forecasted revenue per available room (RevPAR) growth relative to 2022 performance.

Top line performance

While consumers confront higher average daily rates (ADRs) and even fewer amenities, which now come at a price, there still seems to be a steadily growing pent-up demand for travel. In addition to the top three factors driving RevPAR performance in 2023, CFOs also shared what they expected to be the key drivers of Rev PAR growth this year.

Operations

While RevPAR recovery is exceeding expectations, labor shortages are still creating challenges for hotels. The hospitality industry is adapting to meet these challenges by adjusting amenities, outsourcing more, and increasing reliance on technology. One hundred percent of respondents indicated that hotel companies will re-institute all brand standards, including requirements to complete deferred capital expenditures, by 2025. CFOs also shared the top three industry trends causing the most strain on hotel net operating income and tactics that companies are implementing to minimize the impact of operational challenges.

Transactions and capital markets

Hotel transaction activity is forecast to slow in 2023 because of inflationary impacts and the rising cost of debt due to interest rate increases. In addition to making deals more expensive, rising interest rates could boost pricing expectations for sellers, potentially putting deals out of reach for prospective buyers. Sixty percent of respondents noted that they expect minimal hotel asset transactions in 2023. Expectations for this year’s hotel transaction volume relative to last year and top factors impacting transactions this year were also shared by CFO respondents.