Consists of a wide range of product types including hotels, travel centers, water parks, amusement facilities, golf courses, cruise ships, assisted living facilities, and restaurants.
Two main factors drive the hospitality sub-sector of real estate. These include tourism and business travelers. Assisted living facilities are a little different and have other drivers, which we’ll discuss shortly.
When the economy is doing well, middle to upper luxury hotels will see high occupancy. Business travelers prefer these hotels over the lower-end, economy hotels. Tourists have a broad spectrum when it comes to the types of hotels they’ll stay in. Those who are more budget-conscious opt for economy hotels.
During a recession, business travelers may down-grade to middle-end hotels, leaving high-end hotels susceptible to recessions. Budget-conscious consumers will lack disposable income, which hits economy hotels especially hard during a recession.
Entertainment related hospitality follows a similar pattern. When the economy is doing well, cruises, golf courses, and amusement parks do well with it. As the economy turns down, consumers will focus more on needs than wants. Hospitality being a want, it will see a decrease in overall revenues.
We saw during 2020 that the pandemic hurt all hotels, cruises, amusement parks, and generally the entire hospitality sector.
Whether assisted living facilities belong under hospitality or in a category by themselves can be debated. Assisted living facilities have proven to perform independently of the economy. Rather than a want, which most of the hospitality sector is, these facilities are needs driven by an aging consumer base. Even during a down economy, their performance doesn’t take a hit like other areas of hospitality.
Additionally, these facilities did not shut down during the pandemic. This all makes assisted living facilities one of the more resilient areas of hospitality.
Hotels are the most common group within the hospitality sector. They are widely analyzed and followed by the media and professional investors. Many of them are publicly traded companies, making access to their financials much easier than that of other private businesses.
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