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SPOTLIGHT ON David Tessier, Founder & CEO, Hospitality Gaming Advisors

By Sharon Hirschowitz, Global Head of Media & Communications for The International Luxury Hotel Association
3 November 2022
3 min read
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Post-pandemic travel continues to thrive, proving to be fairly resilient to inflation. Development is still robust but is complex, with projects difficult to finance and rising interest rates.

Luxury hotel performance has seen gains during the past year. What has driven the changes? 

The transient segment still remains strong and is at an all-time high.  High-end earners are no longer tied to an office and have more freedom to travel.  Post-pandemic travelers are looking for an experience and are willing to spend more as experience takes a priority over material goods.  There has been a shift in spending on commutes, work attire, and child care, opening up more money to experiential hotels.  

How is inflation affecting the luxury hotel industry? 

The hotel industry has always been seen as a hedge against inflation as we set our rents on a daily basis.  Inflation will impact the cost of goods and labor but is recoverable through a higher ADR.  Higher air travel costs could be a concern, but it has not been a large factor yet and is a lower percentage of the total travel costs for the luxury segment of the hotel industry vs. other segments. 

What is the sentiment as far as luxury hotel development? Where are you seeing the most growth?  

Hotel planning is at an all-time high, according to Lodging Econometrics, mostly because, for the past few years, many properties have been in a “planning holding pattern” while new property planning continues to grow.  It is more difficult to get a project financed today for several reasons.  Many lenders have been extending hotel loans that reached maturity due to covid resulting in lender books being heavy in hospitality.  The current economic environment makes it more difficult to value assets which causes lenders to discount earnings and values. Rising interest rates are impacting project returns and inflation, coupled with supply chain issues and a tight labor market causing uncertainty in project cost and timeline, impacting the ability to get a reasonable GMP from a general contractor.  That being said, great projects in growing markets with great locations and experienced developers are still getting done.  We are seeing the most growth in the luxury segment overseas, especially in the Middle East and Asia.

Are you working on any projects you can share? 

We are currently working on a mega project in Saudi Arabia.  The project has yet to be officially announced, so I can not go into detail, but I can say that, in general, Saudi Arabia has been extremely aggressive in developing its tourism market. Vision 2030 is backed by hundreds of billion SAR, and they have recruited many of the most experienced people in the industry to help guide them.  The country and its leadership recognized the importance of tourism and opening up the country to the rest of the world.  I am very excited and feel privileged to play a small part in this. 

Images: W Nashville