NYU SPS Jonathan M. Tisch Center of Hospitality and Ernst & Young LLP Present Findings from Their 2023 Hospitality Executive Financial Survey

CFOs from 30 Leading Travel and Hospitality Companies Share Their Insights on the Challenges, Concerns and Trends Impacting Top-line Performance Across the Industry

New York, June 21, 2023 — At this month’s 45th Annual NYU International Hospitality Industry Investment Conference, NYU School of Professional Studies Jonathan M. Tisch Center of Hospitality and Ernst & Young LLP (EY US) presented findings from the NYU and EY 2023 Hospitality Executive Financial Survey. The NYU SPS Tisch Center and EY US gleaned responses from chief financial officers at 30 leading travel and hospitality companies for the survey.

“Our work with EY US on this year’s survey shows that while the hotel industry has been nimble in reacting to outside pressures to get its financial performance back on track, more challenges lie ahead, and the industry will need even more creativity to continue its recovery post-pandemic,” said Bruno Eeckels, clinical associate professor and academic director at the NYU SPS Tisch Center and contributor to the report. “The three top concerns for hospitality CFOs and senior management include interest rates, the looming recession fears and the state of the hospitality labor market.”

Sean Hennessey, associate professor at the NYU SPS Tisch Center of Hospitality and a contributor to the report, added, “Although recessionary fears and unfavorable interest rates may dampen transaction activity, survey respondents remained confident that the improving operational trends will sustain the lodging sector’s trend of profit improvement.”

“Working alongside NYU SPS has helped us better understand where the hospitality industry is experiencing friction,” said Umar Riaz, EY Americas Real Estate, Hospitality & Construction Consulting Leader and EY Americas Hospitality Sector Leader. “Recognizing that pent-up demand is still a major factor in play for consumers — despite hurdles like an economic downturn and inflation — hospitality CFOs finding solutions to their problems today will be worthwhile long term.”

Survey Highlights
The NYU and EY 2023 Hospitality Executive Financial Survey was created to gauge the perspectives of leading hospitality CFOs on the industry’s outlook, key growth drivers, and challenges and opportunities for industry stakeholders. Here are some survey highlights:

• Top-line performance: While consumers confront higher average daily rates (ADRs) and even fewer amenities that now come at a price, there still seems to be a steadily growing pent-up demand for travel:
  • Nearly half of hotel CFOs expect the key driver of revenue per available room (RevPAR) growth in 2023 to be a combination of ADR and occupancy.
  • The top three factors driving RevPAR performance in 2023 are:
    • Leisure travel
    • Group travel
    • Business travel
• Operational: Even though revenue per available room recovery exceeds expectations, labor shortages still create challenges for hotels. The industry is adapting to meet challenges by adjusting amenities, outsourcing more and increasing reliance on technology.
  • Top two industry trends causing the most strain on hotel net operating income:
    • Labor shortage
    • Interest rates/financing
  • Tactics that companies are implementing to mitigate the impact of challenges:
    • 35% of respondents say they are raising pay to attract talent.
    • 20% of respondents say they are going to have a greater reliance on technology.
    • 20% of respondents say they are going to adjust the amenities offered to customers.
  • Brand standards:
    • Every respondent said hotel companies will reinstitute all brand standards, including requirements to complete deferred capex, by 2025.
• Transactions and capital markets: Hotel transaction activity is forecast to slow down in 2023 due to inflationary impacts and the rising cost of debt due to interest rate increases. In addition to making deals more expensive, rising interest rates could boost pricing expectations for sellers, potentially putting deals out of reach for prospective buyers:
  • Nearly two-thirds (63%) of survey respondents expect hotel transaction volume (number of transactions) to be below 2022 sales volume, 23% expect it to be at 2022 levels and 13% anticipate it to be above last year’s volume.
  • Top three factors impacting transactions in 2023:
    • Interest rates
    • Valuations/pricing expectations
    • Ability to secure financing
  • Two-thirds (66%) of respondents said they expect limited hospitality platform or entity transaction activity due to interest rates and economic factors in 2023.

View the complete NYU SPS Tisch Center/EY Survey Results

About the NYU SPS Jonathan M. Tisch Center of Hospitality
The NYU School of Professional Studies Jonathan M. Tisch Center of Hospitality, now celebrating close to 30 years of academic excellence, is a leading center for the study of hospitality, travel and tourism. Founded in 1995, the Tisch Center was established in response to the growing need for hospitality and tourism undergraduate and graduate education. Its cutting-edge curricula attract bright, motivated students who seek to become leaders in their fields.

Through its undergraduate degree in hotel and tourism management; its graduate degrees in hospitality industry studies, tourism management, and event management; a plethora of Professional Pathways programs; and its world-renowned hospitality investment conference, students gain the knowledge and the skill sets that enable them to manage change, to communicate, to thrive in complex work environments, and to advance the businesses of hospitality, travel and tourism. The Tisch Center recently launched the Hospitality Innovation Hub (HI Hub), which will foster entrepreneurship and creative solutions for the industries it serves. The state-of-the-art facilities offer students, startups, established industry partners and investors opportunities to learn, discover, innovate and invest.

For more information about the NYU SPS Jonathan M. Tisch Center of Hospitality, visit sps.nyu.edu/tisch.

About EY
EY exists to build a better working world, helping create long-term value for clients, people and society and build trust in the capital markets. Enabled by data and technology, diverse EY teams in over 150 countries provide trust through assurance and help clients grow, transform and operate.

Working across assurance, consulting, law, strategy, tax and transactions, EY teams ask better questions to find new answers for the complex issues facing our world today.

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Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US.