Economist Says Supply Growth Remains In Check and Consumers Still Spend on Travel

Excerpt from CoStar

Hotel industry analysts say sustainable job growth, strong hotel rates and demand, and a wave of international travelers will help the industry keep its head above water.

Most economists agree the U.S. will experience a recession to some degree in 2023, but hotel industry analysts say sustainable job growth, strong hotel rates and demand, and the yet-unrealized wave of international travelers will help the industry keep its head above water.

Adam Sacks, president of Tourism Economics, told attendees at the Hunter Hotel Investment Conference that inflation persists as the current cause of “percolating worry.”

“Inflation is the epicenter,” he said. “The latest data shows prices are 6% higher than they were one year ago, and this year, the average household is spending an additional $400 per month on goods and services. Surely this leaves a mark.”

This week, the Federal Reserve raised interest rates in the U.S. by a quarter of a percentage, and the Fed has indicated another similar hike may still be in the cards later this year.

“The housing market is already in recession,” Sacks said. “And manufacturing as well. The cracks in the façade become more evident when you see how households are taking on debt.”

That’s happening mostly in the form of credit card debt, and Sacks credited inflation with affecting how people are spending money and taking on debt.

However, Sacks reminded the audience that even if consumer spending drops, it’s coming from a strong place.

“This recession will be mild because of liquidity,” he said. “Even with all the noise of financial turmoil, households still have an incredible amount of cash on hand.”

Click here to read complete article at CoStar.