By Tucker Johnson
On February 12th, the Wall Street Journal published an article titled Slowing Hotel Growth Could be Worst in 10 Years. This headline was based on an STR (formerly Smith Travel Research) forecast suggesting that supply was overbuilt and hotel occupancy would level off, then decline over the next two years. On February 14th the Washington Post published an article titled Trump’s Company Officially Halts Hotel Expansion. The Trump Organization cited the ‘political climate’ as their reason for scrapping their new American IDEA Hotels and Scion brands.
As someone who follows hotel news closely this seemed like strange timing and worth at least a little examination. I don’t follow politics as closely as I probably should, but it seemed like Trump’s standing has not really changed wildly since the announcements of American IDEA Hotels (June 6th, 2017) or Scion (September 28th, 2016), yet every article I read related to the stoppage (Fortune, CBS, Bloomberg) confirmed it was due to the ‘political climate’.
I decided to check President Trump’s approval rating as it appears to me that people who hate Trump still hate him and people who like Trump still like him.
According to Rasmussen, President Trump’s approval rating on the day his organization announced the end of their new brands (February 14th, 2019) was 50%. The day American IDEA Hotels was announced (June 6th, 2017) President Trump’s approval rating was 46%. The day that Scion was announced (September 28th, 2016) he was still campaigning so there were no official approval ratings available. That being said, his Access Hollywood Tape was released nine days later which, at a minimum, created a tough political climate for him.
I guess my question would be: Is the political climate really worse now if President Trump’s approval rating is higher today than the day the brand was announced? Is the political climate really that much worse than within 10 days of the Access Hollywood Tape release?
In talking with developers, I have been told that construction costs and labor costs have been increasing. This is confirmed by PwC, who wrote on January 29th, 2019, “Financing conditions are getting tighter, and labor and construction costs are growing. Those factors could cause a lag in supply growth.” This information seems consistent with a decision to slow or hold off of new property builds.
From what I have seen, the Trump Organization has always been more concentrated on being pragmatic than political. They have focused on making money and have not seemed overly concerned with the general mood towards their business. I think this cancelled expansion announcement has more to do with economic realities than political issues. As an owner or operator, I would take this decision by the Trump Organization as a possible sign (or confirmation) of a slowdown to come in the future and be ready to make adjustments as needed.