There’s a beautiful little Airbnb up in the Poconos that – if the pictures are to be believed – looks like it’s right out of a Thomas Kinkade painting.

With three bedrooms, three beds, and two baths, it accommodates up to eight people… who are more than welcome to use the hot tub out back, the grill on the balcony, and nearby trails.

Better yet, you can book it for just $163 per night right now – down from $202 – for a total of $1,195 for five days!

If you’re looking at that total and wondering if your remedial math skills are off… the answer is no. Because $163 times 5 is actually $815, not $1,195. It’s just that there’s an additional $150 cleaning fee and $136 service fee tacked onto your “final” price.

Which, incidentally, doesn’t include taxes ($94.83). Which means you’re paying a total of $1,195.83 for that five-night stay.

Not so inviting after all.

Look in that same general area, and you’ll find a Best Western Inn for $98 per night. Rooms at The Holiday Inn Express can be found for $107. And there’s a lovely bed-and-breakfast for $155.

Admittedly, it’s not apples-to-apples. Each option comes with its own perks and drawbacks.

But contrary to what many predicted only a few years ago, the Airbnb economy has not signaled the death knell of the traditional lodging industry.

Today, we’ll have a look at it…

There’s Just Something Comforting About a Hotel

I’m not trying to knock Airbnb, VRBO, or any of the other hotel alternatives out there. I genuinely wish them and their business models the best.

Yes, it wasn’t long ago that the business world was abuzz with speculation over hotels’ downfall. Right after Airbnb launched in August 2008, people were in love with the concept. By March 2009, the website boasted 10,000 users and 2,500 listings.

And 10 years later, the U.K.’s Guardian was running an article titled, “How Airbnb Took Over the World.” In little more than a decade, it wrote, the business had “grown from nothing to a $30bn firm.”

How could traditional hotels possibly keep up?

Today, nobody denies that Airbnb and VRBO have, indeed, taken a chunk of the market from hotels. But I was always skeptical that short-term rentals would be an apocalypse for traditional lodging.

For one, Airbnb pricing is not always transparent. For another, there are individual horror stories or dirty or dangerous rental homes that look nothing like the posting. Airbnb has attempted to correct this with the introduction of “full pricing” filters and “Super Hosts” on its platform.

But despite all this, individual rentals can’t hope to compete with traditional hotels’ greatest assets, their brands.

Check into a Marriott, Hilton, or Wyndham anywhere in the world, and you will be met with the same thing – consistency. These properties are consistently clean, consistently safe, consistently well-managed, and consistently priced.

The concierge is a few floors down, unlike a “host” who could be miles away. Oh, and there are no chores with a hotel stay. If I wanted to wash dishes during my travel, I could have just stayed at home.

A Rising Optimism Among Hotel Insiders

The annual Lodging Conference took place a week ago, with industry insiders descending on Phoenix, Arizona.

I wasn’t able to attend (due to some very big projects underway that I can’t wait to fill you in on). But there are plenty of trusted sources that did.

One such site, HotelDive.com, reported how “overwhelmingly optimistic” guests were – with quote after quote after quote to back that assessment up.

Take Kevin Davis, the Americas-specific CEO for JLL Hotels & Hospitality Group, who sees very good things ahead. He expects hotel deal activity to increase the rest of the year as interest rates decline, with 2025 looking even better.

It’s like a boulder at the top of a hill. It kind of starts small and slowly. But as it starts to go down the hill, it gets bigger and it goes faster. I think that describes what the transaction market will be like next year.

Highgate CEO Arash Azarbarzin added that:

The supply has never been so low. New construction has never been so low. So with the interest rate coming into place, I think the investment horizon is going to be very bright for 2025.

And Extended Stay America CEO Greg Juceam is optimistic about the industry’s increasing ability to refinance, update, upgrade, and otherwise improve its presentation and portfolio standings.

This isn’t to say the industry doesn’t still suffer from issues, such as paying and retaining employees. With blue-collar wages rising across the board, it’s been forced to offer better salaries and benefits.

And the cost of everything else – from food to replacement items to energy to repairs – is cutting into hoteliers’ profits as well.

However, there are still reasons to be optimistic.

2019’s Business Travel Spending Looks Low Compared to 2024’s

One very big reason why the lodging industry looks so bright right now is the return of global business travel. This kind of corporate spending might very well surpass even what we saw in 2019.

That final pre-pandemic year was a very good one in this regard (and so many others). Yet 2024 could see a 6.2% rise to a record $1.5 trillion.

That’s thanks to the rising demand for workers to come back to the office, with business leaders worldwide reinforcing the need for hands-on, face-to-face experience. That’s significant considering how much national and international hospitality chains rely on it.

We’re talking about a third of their profits, if not more.

While personal excursions have been on the notable rise since 2022 – keeping the TSA very busy – tepid corporate bookings have weighed on the industry. Until now.

Naturally, you’ll want to keep in mind that this industry is very tied to the economy. Their products are a luxury, not a necessity. So, when tough times hit, their customers at every level do cut back.

And their shares, not to mention their dividends, can fall in response.

With that said, if you (like those insiders in Phoenix) are bullish on traditional hotels, here’s the list of lodging real estate investment trusts (REITs) to mull over.

To be clear, none of these are official recommendations. But if you’re at all interested in the space, this could be a good place to start.

And if you’re able to join me next week at the Stansberry Conference in Las Vegas, be sure to attend my presentation. I’ll reveal a specific sub-sector of lodging that I’m wildly bullish about in the years ahead.

Regards,

Brad Thomas
Editor, Wide Moat Daily