HOW TO BLOW A SOFT BUBBLE WITHOUT EVEN TRYING

February 22, 2017
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From a deep, long lasting recession, the hospitality industry jumped overnight, (about three years ago) into a period of enthusiastic and unbridled growth. Airports and industrial suburbs, where most of the “traveling salesman” types continue to stay, no longer appeal to the “hip” developer. Downtown and urban areas is where hotel development has been taking place. The younger clientele, including, at large, generations X, Y and Z, treat urban centers not only as work place during the week, but also as leisure getaways on weekends. Not unusual at all for a downtown or industrial location to run a higher occupancy on weekends than it does during the week.

Here is the issue, however: the construction/conversion pipeline continues to be chockablock, but demand has reached its peak. Demographics are such that Baby Boomers, once the Number One market for traditional luxury hotels, are getting… old. Generally speaking, their successors are NOT into luxury.

But what I think we are to be most concerned with, however, is the new Administration’s proposed immigration and international travel policy – even if it appears to be changing daily.

Hypothetically, if you were a wealthy Mexican citizen, residing in Mexico, you have been highly desirable to hotel operators in the United States since you, along with Brazilians and Russians, are known for spending the most money per occupied room. A Brazilian in Miami spends twice as much as an American. The travelers from Mexico are not far behind.

Suppose you are a legal Mexican immigrant in the United States – there are millions of them in our country, many of them successful, wealthy and independent. Would you not consider, for family reasons, leaving the US and going home to Mexico where you can very successfully invest the capital you earned in the United States? Back home, you will be “someone who made it” as opposed to an “illegal” here. Because it is not what immigration status you have, but who you look like that will attract attention. We say there are millions of illegal immigrants in the United States. Nobody, however, has been able to come up with a number for “legal” immigrants. They do not have to be US citizens, merely to have a Green Card or be in the process of obtaining one.

Suppose you are a rich Saudi, Qatari, Kuwaiti, Bahraini or Emirate dweller: chances are you took offense at President Trump’s comments and actions against Muslims in general. Given the choice between Beverly Hills or Paris or the French Riviera, where will you be spending your millions next summer? Ask the Beverly Hills Hotel and the Beverly Wilshire what happens to their summer occupancy and rate when the Middle Eastern crowd does not show up.

Indeed, unless we become more friendly to foreigners in general, 2017 may end up being a VERY BAD YEAR for Hoteliers.

3 Comments

  1. Robert Cohn February 23, 2017 1:54 am

    The country will adapt to new circumstances.

    Reply
  2. Chris Scoolis February 23, 2017 9:26 am

    Thank you for bringing this into a practical context. It’s ironic it is coming from a President that owns hotels!!! It won’t only be bad for hoteliers but all business. We must all be vigilant and speak up on this issue. The collective resistance against these anti-business policies are having an impact at least.

    Reply
  3. Mario Sarafraz February 23, 2017 10:08 am

    This too shall pass. When its all said and done, people will eventually go back to where they desire most regardless of political atmosphere. A wealthy Russian, Saudi, etc. will always find most pleasure in the west than in their own country.

    Reply

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