While costs are steadily creeping up for hotels, stronger-than-expected revenue growth continues to push up profitability, according to a survey from the Hospitality Asset Managers Association.

In the latest addition of the association's spring survey, a majority of respondents said they expect most of their hotels to exceed budgeted gross-operating-profit levels.

Speaking with Hotel News Now during the HAMA Spring Conference in San Francisco, board members of the association said recovery from the COVID-19 pandemic hasn't been felt evenly.

"Looking at budgets, if it's an urban location, it's still closing that gap to 2019 levels, whereas if it's a drive-to destination, they were already setting records in 2022," said Adam Tegge, vice president of acquisitions for Ashford Inc.

What remains unclear, though, is just how long this run can last, and how increasing cost pressures will affect the industry if macroeconomic issues spur on a demand downturn.

Derrick Yee, vice president of asset management for Placemakr, said 2023 could be a year that rewards broad commercial real estate investors who are willing to take a gamble on the hotel industry, especially as other asset classes falter. That could mean an uptick in converting real estate such as office spaces into hotels.

"For groups that are willing to take that risk and have the appetite for redevelopment, I think that's an opportunity," he said. "People need to place capital somewhere, and I think we might see that starting to shake loose."

Source: www.CoStar.com