Slow Growth, Higher Labor Costs to Challenge U.S. Hotel Margins Says Fitch Ratings

Fitch Ratings | November 17, 2016

Fitch Ratings-New York-17 November 2016: Hotel RevPAR will turn negative in the second half of 2017 as weak corporate and decelerating group demand challenge asset owners looking to offset expense growth, Fitch Ratings says. While lodging companies have cited relative leisure strength as an offset to weak corporate transient demand, we believe increasing hotel labor costs will also pressure margins. Hotels generally need 3% or greater RevPAR growth to keep EBITDA margin flat, and 1.5%-2% RevPAR growth to offset 2%-3% expense growth to maintain current EBITDA. This rough analysis assumes a 30% hotel EBITDA margin. Fitch has revised its 2...