As we head to the end of 2023 and towards 2024, a certain uneasiness rests in the air. Hotels are budgeting to be up in revenue for 2024, albeit at diminished increases relative to the preceding three years. Operators are cautiously optimistic along with their owners. Buyers and Investors stand by as interest rates remain above the average of the last two decades and the economy shifts between slow and moderate speeds. Investors continue to be challenged and frustrated by the transition into a lenders’ market. At least for now, the Fed’s decision to hold and not raise rates has provided a glimmer of optimism. Improved market fundamentals emanating from consumer spending should assist in counterbalancing the increased borrowing costs.

For the near term and at least through the first half of 2024, the demand for travel and lodging should remain strong. The holidays at the end of the calendar year often slow down markets, as business travel decreases. Leisure travelers who are time-constrained but possess strong disposable income are allocating a larger share of their budget to travel, outpacing other areas of personal consumption. Favorable demographic shifts (that of the Millennials and Baby Boomers) continue to lift this trend by feeding the desire for travel and pushing the envelope specifically for leisure travel, which continues to increase.

Economic forces and the prolonged recovery may be causing anxiety for the industry. However, a below-average supply pipeline is expected to maintain or continue to drive rates up, at least for the near term. The return and improvement of international inbound tourism, a slight improvement in business travel during the first quarter of 2024, group attendance, and continued reliance on leisure travel will fuel occupancy through the first six months of 2024.

The holiday season brings both challenges and opportunities for the travel industry. While demand fluctuates during this period, the diversity across geographic markets allows for targeted strategies to capture available business. As we move into 2024, expectations are for a return to normal travel patterns across all segments in the first quarter, setting up continued momentum for lodging. With careful planning and execution, we can ride out any holiday volatility and capitalize on the market reset demand headed our way in the new year.