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Economic ‘Uncertainty’ Is Theme of Lodging Conference Keynote

Economic ‘Uncertainty’ Is Theme of Lodging Conference Keynote

While projecting a “soft landing” for the U.S. economy going forward, economist Bernard Baumohl acknowledged that much of the uncertainty surrounding the macroeconomy makes it very difficult to accurately forecast what lies ahead for the lodging industry in the near term.

Speaking during the general session at The Lodging Conference, Baumohl—chief global economist at The Economic Outlook Group—began his remarks by saying the U.S. economy has been “remarkably resilient” over the last few years.

Nevertheless, “there is clearly a lot of uncertainty with respect to 2025 and beyond,” according to Baumohl. He pointed out that the three main factors that will determine the course of the economy going forward are any further interest rate cuts, the geopolitical crisis in Ukraine and the Middle East, and the upcoming U.S. Presidential election.

Despite these uncertainties, Baumohl went on to insist that he doesn’t see any major cause for concern.

“Frankly, I’m all in for the fact that we’re likely going to have a nice soft landing. This means the economy is going to slow down a little bit next year based on some baseline assumptions, which is there are no other changes in tax and fiscal policy. So we’ll see a continued slight slowdown in the economy and very little inflation,” he noted.

Regardless there is one major area of concern for Baumohl around consumer spending, which he expects to decline, particularly within the hospitality ranks.

“In the second quarter of this year spending on lodging actually slipped a little bit and it’s really the first time that we’ve seen a quarterly decline in spending since the death of the pandemic,” he asserted.

Baumohl further explained, “Having said this I want to be clear, I think the fundamentals of the lodging industry are still really quite strong. We have a strong job market, we are seeing interest rates come down and the pandemic did bring out new converts to the joys of travel, which I think it has led people to really believe that travel allows them to enjoy a whole new life experience. So I think the fundamentals of the industry are fine, but we could be seeing again a bit of a breather or a pause on that kind of spending on lodging.”

Finally, Baumohl noted there are two very different economic pictures based on who wins the election. “We have the closest race in modern history between two candidates that have wildly and profoundly different economic and political strategies,” he said.

Baumohl expressed more concern with the economy if Trump were to prevail, based on the potential erosion of independence for the Federal Reserve in terms of controlling interest rates.

“I think you’re going to see a reaction to that in the financial markets. The overall cost of capital [could be impacted] and that’s going to cause an effect to choke off economic activity, which is why I see the economy slowing down in the final two years of a Trump administration,” he concluded.