When a collection of hotel industry veterans get together, the question must be asked: What’s next for hospitality? This was the topic of Hotel Management’s recent Executive Roundtable sponsored by Remington Hospitality. The event was held in late January during the Americas Lodging Investment Summit in Los Angeles at the Remington-managed Cameo Hotel in Beverly Hills, which is set to convert to a LXR Hotels & Resorts property in late 2025. The discussion focused on optimism for the year with expectations of improved cost of capital, a less challenging development market all while continuing to cultivate group demand.
There’s a positive enthusiasm as the hotel industry enters 2025, noted Joe Berger, president and CEO, BRE Hotels & Resorts. “As we look at the business outlook with the new [White House] administration which has created a really positive outlook on business—creating a nice bump on what we saw in 2024,” he said. He also noted that group business demand continues to stay incredibly strong, adding to the positive momentum.
Joe Piantedosi, EVP, asset management at Park Hotels & Resorts, agreed that 2025 would be a better 2024—this year would have greater visibility into the future. “We’re past the uncertainty of the election so there’s now a sort of roadmap for where to go,” he continued. “Group remains strong. Business transient is strong. We now see leisure has sort of moderated, too—but you can plan against that. We can act and sell our commercial strategy around what is going to be the outlook for the year.”
The return-to-office mandates are dictating the mid-week demand despite some of the big consulting firms not requiring employees to come back into the offices. Tom Corcoran, president and CEO, TCOR Partners, strongly believes there is a permanent shift in how businesses handle travel. For example, companies like PwC, traditionally known for frequent and expansive business travel, discovered the efficiency of remote work during the pandemic. Corcoran noted that PwC found they could consult remotely so “why would they change back?”
“I think it’s a permanent impairment for [the hotel industry],” he surmised. “Who is going to be the replacement for those consultants in our hotels?”
Sloan Dean, CEO of Remington Hospitality, agreed that business transient travel will forever be altered but he’s noticing business transient is back about 85 percent from a room-night perspective. “But I’ll take the contrarian view, that in the next three or four years, we will get back to normal levels,” he said. “Deloitte [consultants] used to be the number one room night producer for Hilton properties but those days are gone.
While it’s true that business travel has decreased, the industry is also witnessing a rise in other forms of demand. Hotels have increasingly been catering to small and mid-sized businesses, which have seen an uptick in demand for meeting space and accommodations. The diversification of accounts has its benefits, such as less reliance on a few major clients—spreading risk and ensuring a more stable revenue base.
“We don’t have all our business in one account now that cramps you up and down and you don’t get a rate increase each year,” Dean said. “Per our tracking, small- and mid-size accounts are up 10 percent to 15 percent over 2019. It’s just the mega Fortune 500 companies and consultants that are down—Google, Coca-Cola, Deloitte are way down.”
Thomas Healy, president and COO of Rockbridge Hospitality Management, said he feels like this year will be very similar to 2024. "Any supply at this point is problematic, and because when it enters market, not only does it press up your rates but it also presses down your wage," he said. "The brands are becoming more and more rigid. They're unflexible. Every little tool you try to see if there's a way to call back profit, it's hard to do."
Healy believes corporate volume and project work has to come back to make a positive impact this year. "If corporate volume comes back—good corporate volume—will benefit urban hotels. My expectation is drive-in markets will be strong and regularly improving."
Group Travel
One notable observation is the increase in group travel and company off-sites. With many businesses shifting to hybrid or remote work models, there has been an increase in off-site meetings, often in hotel conference rooms. These gatherings, which were once less frequent, are now becoming a more common feature in corporate life. Hotels are now seeing a rise in demand for meeting spaces, even from companies with smaller teams or remote workers.
Jon Stanner, president and CEO, Summit Hotel Properties, has a slightly different perspective, having noted “compression” on Tuesday and Wednesday nights in the company's urban hotels. “We're full in urban markets on Tuesdays and Wednesday nights—there’s enormous pricing power on those nights," he said. "The shoulder nights are different. They recover quicker because the whole leisure travel thing ... has lost a little bit of steam. But your ability to drive rates on Tuesdays and Wednesdays and Fridays, Saturday nights, is there.”
As the pandemic has fundamentally altered how people view work and leisure, younger generations, particularly millennials and Gen Z, are now traveling more than ever before. These younger consumers prioritize experiences over material goods, spending a larger portion of their discretionary income on travel and leisure. However, the challenge these generations face is the impact of inflation, which has limited their ability to save. Even as they travel more, their financial constraints mean that many are opting for more affordable options and shorter trips.
“Leisure demand is hurting and it’s because the work from home is being repealed—if you have to go into the office, your office can’t be at hotel or Auto Camp or a national park,” said Richard Stockton, president and CEO, Braemar Hotels & Resorts.
Looking Ahead
Looking forward, Stockton is hoping the cost of capital and the base rates coming down. “What’s even more exciting is what is happening in the [commercial mortgage-backed security] market,” he said. “We probably saw 50 basis points or more in compression in 2024 and I feel like we’re due for at least another 50 basis points compression. So the cost of debts are coming down and that’s great.
Stockton also believes this will be helpful for asset values. “One of the things that characterized 2024 is that the investment market came back and there was a bid for hotel skin,” he continued. “Even though transaction volumes were down, if you needed to sell an asset, you could get enough bids to have a bit of a competition and get a market claim price. Now that price was probably 150 basis points wider than it was five years ago under terms of the cap rate, but you could get a deal done.
“That's because the debt markets were constructed. Now, money-center banks weren't back lending, but there are other alternatives, whether it be fixed-income markets or debt funds or whatever. I think in 2025 we'll see more of that. So I'm optimistic that to the extent that [if] we wanted to sell assets, we can get [a] fair price.”
Corcoran agreed. “If we actually get the cost of debt down, the cost of capital down, the values will go up,” he said. “It is probably the single biggest piece of the puzzle that will make 2025 a much better year.”
Stanner’s opinions of 2025 are influenced by the fact that his company is publicly traded. “I’m excited because expectations are really low,” he said with a chuckle. “I’ve always said, ‘happiness is actual results minus expectations.’ So it doesn’t take a lot to be better than where we’ve been for there to be real upside in our business.”
Narrow Windows
Historically, there have been narrow windows where public companies have been able to raise capital and grow externally, Stanner said. “I think that the components are in place for equity cost of capital to come down and have a cost of capital that allows you to grow the business externally. The convergence of those trends, along with the opening of the transaction market, get me excited."
The second largest exportation of U.S. travelers is to the Caribbean (behind Europe), so Dean said Remington is poised to add 10 to 15 hotels in the Caribbean and Latin America region alone to capitalize on the affluent travelers to the region and the increased growth in revenue per available room going along with those travelers. In some Costa Rica hotels, Remington had 20 percent year-over-year growth, culminating in a variety of different factors but heavily from the Canadian and U.S. travelers.
While Dean does believe the growth will slow in the latter part of 2025 and into 2026 because “you can’t keep that level of growth up,” the region is creating a big win for Remington.
Looking Back on 2024
Reflecting on 2024, it feels like a year that was neither overly positive nor exceptionally negative for many industries, particularly the hotel business. While some might describe it as a "yawn year," according to Corcoran, the reality is more nuanced. There were a variety of challenges, both anticipated and unforeseen, but also some signs of hope, even if they were slower to materialize.
To start, the overall growth in the hotel sector was somewhat underwhelming. RevPAR didn't see the robust growth many had hoped for, especially in domestic markets, Stanner said. This disconnection between growth in gross domestic product and hotel demand was a notable trend in 2024, and it wasn’t a pattern that could be easily explained. Factors like the post-pandemic shift in demand patterns, the ongoing strength of the dollar, and the slow return of business travel all played roles.
Some of the challenges were felt more sharply in specific segments. Resorts, for example, struggled with declining RevPAR, a hangover from the pandemic’s surge in demand. As travel policies loosened and international travel recovered, many resorts faced lower-than-expected demand, having to contend with the aftereffects of work-from-home trends and stimulus-driven travel booms. Urban properties, on the other hand, performed better, with strong demand for group business, meetings and conventions returning to city centers.
One major issue that dampened overall performance across the board was the continued strain from labor pressures and rising costs—a situation not changing in 2025. Property taxes, insurance premiums and rising wages also weighed heavily on profit margins, especially for those with resorts or properties in areas like Florida, where insurance costs nearly doubled. “If you have a property in Florida, you’re in real trouble,” Corcoran said.
The challenges of 2024 were compounded by high interest rates, making it difficult for property owners with floating rate debt. While interest rate cuts toward the end of the year were seen as positive signs, they didn’t immediately translate into the kind of growth the industry had hoped for. The slow accumulation of rising costs, taxes, and interest rate hikes made it feel like the year was a drawn-out struggle, rather than a sharp blow.
Looking ahead to 2025, most of the panelists remain cautiously optimistic. While 2024 might be a year many would prefer to forget, it did lay the groundwork for potential improvement. The slowing pace of inflation, the easing of labor pressures, and the expected stabilization of insurance costs all point toward a more favorable outlook. However, challenges like supply increases, inflation and economic uncertainties still loom. For now, the consensus seems to be that while 2024 was tough, it was not a complete disaster, and there's hope that the lessons learned can fuel better performance in the coming year.
This article was originally published in the February/March edition of Hotel Management magazine. Subscribe here.