LOS ANGELES — Business folk plan. But in order to devise one, it’s good to have a clear understanding of the landscape in which the plan is being created. In other words, agree or disagree, what is known is better than the unknown.
From tariffs to taxes to Trump, lodging company executives at the Americas Lodging Investment Summit, here at the JW Marriott LA Live, want to make decisions amid a landscape of clarity that is sturdy and static, no matter where it leans.
A capricious president and a flurry of executive orders have discouraged some. “We are looking for the gameplan so we know what’s going to happen,” said Craig Smith, president and CEO of Aimbridge Hospitality. “Our business thrives in times of stability and economic vitality,” added Tony Capuano, president and CEO of Marriott International.
Still, most believe that if President Trump is successful in achieving his pronouncements and promises on issues including immigration and taxes, it will be broadly beneficial for the hospitality industry, as Chris Nassetta, president and CEO of Hilton, put it.
“He will listen more to businesses than [President] Biden. He wants more economic growth,” Nassetta said. “Businesses like certainty. And if they don’t know what will happen with regulations, taxes and more, if it’s up in the air, you spend less. If there is clarity, you spend more. If he addresses these things, it will translate into stronger business.”
Added Smith, “Deregulation will help us.”
The labor-intensive hotel industry makes immigration reform a hot-button topic and meaningful to hotel leaders. Executives speaking on anonymity at the conference said there were hotels that employed so-called illegal immigrants, but were not more specific.
CEOs agreed that there is the need for comprehensive immigration reform. Elie Maalouf, president and CEO of InterContinental Hotels Group, noted that over the last four years, illegal immigration was three times the level of the previous three presidents, roughly 1.5 million per year, but “those weren’t great years for labor,” he said. “You’d think more illegal immigration would create more fluidity in the labor market and it didn’t.
“We build long-term businesses. “There is more confidence in business today—a surge.”
Why not? But as Nassetta put it, the hotel industry is still on what he described as a “sugar high,” and like all sugar highs, there is a come down. “Leisure business has ripped since COVID, meetings and events have picked up, but corporate has been slower to return,” he said. A push by many companies to compel employees back in the office more days per week could be the impetus to impel an increase in corporate transient business.
The Pulse of Investment
Inciting more investment and deal-making in the hotel space is also topical because there hasn’t been as much. And while stubbornly high interest rates and construction costs are oftentimes pointed to as reasons for the dry spell, Marriott’s Capuano argued that it’s the availability of debt for new construction that is the real culprit. “We have shovel-ready projects that are paused because there is no free flow of debt,” he said.
This is not the case for existing assets, he said, but for new development, the glacial pace leading to below-historical-level supply growth, which, conversely, is an assist for hotel performance, a pure function of supply and demand.
“Big banks don’t want to see real estate deals in committee,” Maalouf said. “Capital availability has been restricted.”
Hilton’s Nassetta is optimistic on the prospects of more debt becoming available, especially as banks move out on the risk spectrum to get returns. “You are going to see more capacity,” he said.
The transaction market hasn’t been as chocked off as new development, but is still off its year-over-year normal numbers. JLL expects global hotel investment volume to improve in 2025, likely exceeding 2024 by 15% to 25%, but that is coming off a rather enervated 2024, a year that reached $57.4 billion in investment volume, the third-lowest total since 2012. Expectations are for private equity to be big buyers of hotel assets in 2025. “All the big ones have capacity to invest,” said Nassetta. “They need larger capacity to lever up because leverage is their game.”
A turnaround in 2025 is a welcome sign, especially for hotel brands and third-party management companies that thrive on churn: lodging companies, amid the new-development shortage, are more and more turning to conversion projects to hit net-unit-growth goals.
Brand conversion could pick up even further in the fertile grounds of Europe where close to half of hotels are unbranded. “We are growing out conversion business there,” Maalouf said.
There is also the expectation for further consolidation in the hotel space, on the brand side and the third-party management side. Capuano said there would be more bolt-on acquisitions, like it made last year with companies such as Postcard Inns, Marriott’s dip into the outdoor accommodations space.
A move by hotel companies to add in adjacent spaces beyond traditional lodging is a theme that is showing no signs of let-up and will likely gain more steam in order to further build out loyalty programs and satisfy members to, as Capuano put it, “keep in our ecosystem.”
“Customers want more experiences that are adjacent to traditional lodging. You’ll see more of it from us,” said Nassetta. Hilton signed a strategic alliance last year with AutoCamp, which offers outdoor lodging and experiences through accommodations like Airstreams.
Aimbridge’s Smith now leads a company that has had a pockmarked few years, but appears to have righted the ship after it negotiated a restructuring agreement with its lenders that should put it on more solid footing moving forward. He, too, expects more M&A in 2025. “We will see more consolidation in the management space,” he said, offering that third-party management is also becoming more accepted in Asia. “It’s opening doors to put companies together and use scale.”
One other topic Trump has tackled in his first days in office is DEI and marginalizing it at the government level. Hotel CEOs aren’t as convinced of eradicating it. “We can’t be successful if we aren’t attractive as an employer,” Maalouf said.
The lone foreign voice was equally supportive of DEI efforts. “Diversity and inclusion,” said Jean-Jacques Morin, deputy CEO of Accor. “There is no way back.”
