The Hotel industry regaining momentum through 2021 and many industry prognosticators expecting a comeback in group and business travel in 2022 are both positive signs for hotel owners and investors, but significant hurdles remain for those groups.

Here are some of the highlights from recent Hotel News Now coverage on the issues hotel owners face.

At the depths of the pandemic, many owners exhausted their reserves earmarked for capital expenditures, such as renovations or furniture, fixtures and equipment, to fund operations and pay debt service in a zero demand environment. But even with those reserves critically low, many hotel brands are expected to begin pushing for property improvement plans and regularly scheduled maintenance.

Speaking at the recent NYU International Hospitality Industry Investment Conference, Noble Investment Group CEO Mit Shah said the industry faces a crisis if hotels aren't renovated to provide a quality experience for guests.

“This is a real structural problem, and nobody has an answer,” he said.

A study from NYU adjunct professor Bjorn Hanson shows CapEx spending could soar 70% in 2022.

Stiff Competition for Assets

There is little question right now over whether it's a buyer's or seller's market for hotel investors, with many saying they're seeing historical levels of competition for assets.

Access Point Financial CEO Michael Lipson described the phenomenon as a "wall of money."

“We’re seeing this is becoming a very competitive marketplace," he said. "It's almost like the pandemic didn't exist.”

Much of that capital is coming from private equity groups, but hotel-focused real estate investment trusts announced a wave of transactions during the third quarter earnings season, lead by Host Hotels & Resorts spending $415 million on three assets.

Evolving Debt Markets

Financing is available today, particularly when buying existing assets, but construction lenders are re-entering the hotel space a bit more cautiously.

Construction lender Hall Structured Finance is looking to do $700 million in "new-construction projects" in 2022, though.

The availability of financing is still not at pre-pandemic levels, though, and the make up of those who feel comfortable with hotel projects has changed. Regional banks, in particular, are still reticent.

“Unless you’re a top-tier borrower, you’re probably still going to have trouble,” Peter Berk, president of PMZ Realty Capital, said. “My crystal ball says that by the middle of next year, most lenders, local banks will get more comfortable dipping their toes back into the construction area. They will see that their existing loans are stabilized and that they can move forward with new projects.”

Supply Chain Woes

Even those who are able to find financing for the development projects are inevitably coming across the same, pressing issue, unprecedented supply chain snarls and construction labor shortages.

Speaking at the 2021 Lodging Conference, Keith Mack, director of development services at Atlanta-based real estate development and acquisitions company Regent Partners, said developers need to plan well ahead to avoid delays in projects, and they should expect to spend more, too.

"The longer you wait, the more risk you're exposing yourself to. You certainly want to get the [purchase orders] and specifications written as quickly as possible," he said. "For construction pricing, at least in the Southeast, what we're experiencing is 5% to 6% escalation."

Lack of Clarity in Budgeting

One of the most persistent pandemic-era hurdles for hoteliers is being able to consistently and accurately predict demand, which is key in a period with streamlined operations and hyper focus on profitability

Sources said setting budgets for 2022 has been particularly hard given recent demand fluctuations.

“Budgeting is always kind of a crystal-ball question, and I think this year is particularly cloudy,” said Barbara Purvis, president and director at Essex Hotel Management.