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As the world continues to stabilize after recent pandemic disruption, economic uncertainty, and political unrest, certain industries have begun to experience rapid growth. One such industry is hospitality, which has seen increasing consumer spending trends towards travel and recreation, leading to a boom in hotel and hospitality real estate.
The hospitality industry is projected to return to pre-Covid levels, with it expected to reach $0.63 trillion by 2025 and growing at a CAGR of over 14% to reach $1.4 trillion by 2030. What should you be aware of as you consider hospitality real estate investments? Let’s take a closer look.
Are you looking for even more information about hospitality commercial real estate? Take a look at our recent article here, 3 Reasons for Hospitality Commercial Real Estate, and learn about the exciting advantages of investing in this sphere.
Hospitality Real Estate Investing 101
The hospitality sector is experiencing an increase because business travel has grown, returning to pre-Covid levels, and hotels, especially in urban areas, benefit from this growth. There are several U.S. locations to watch if you’re looking for a quality hospitality real estate investment.
For instance, the New York hotel market should see an increase in visitors as the state continues placing more restrictions on short-term rentals. The Boston hotel market should experience strong demand because of the universities nearby that experience many visitors each year. Other cities, like Las Vegas, Houston, and Washington, DC, are projected to see increased hotel occupancy rates as business travel continues to rise.
Leisure is making a comeback as well. This is because some consumers are extending their business trips for leisure purposes. While international travel to the U.S. has not yet reached pre-pandemic levels, the statistics are promising and should continue to recover, with the U.S. Travel Association projecting international inbound travel to the U.S. to reach 98% of 2019 levels, compared to 84% in 2023.
Additionally, with continued supply chain challenges and rising interest rates, hospitality construction has seen a slowdown recently. That means existing hospitality properties are poised to be in even higher demand as competition decreases. Many cities are also seeing increasingly stringent regulations on short-term rentals. For instance, New York City passed a new law in 2021 curbing short-term rentals, such as Airbnb, leading to reduced listings by over 80%. With new hospitality establishments in limited supply, it would be wise to invest in existing real estate properties to take advantage of this competitive edge.
