https://www.statista.com/chart/18293/treasury-yield-curve/
 
As noted by Felix Richter of Statista in this excellent article, Inverted Yield Curve: An Ominous Sign?, the U.S. Treasury yield curve is now inverted; meaning that short-term Treasury bond yields are higher than for longer-term bonds.
Richter notes, “In plain terms, the curve is inverting because more people are trying to invest their money in long-term bonds, thereby lowering those bonds’ yields. They are presumably doing so because they want to lock in long-term yields to tide them over a period of losses (a recession) since they fear that the market will not be offering them feasible short-term investment options anymore”.
 
 
Referenced in the article is a 2018 Federal Reserve research paper by Michael D. Bauer and Thomas M. Mertens, which states,

“Every U.S. recession in the past 60 years was preceded by a negative term spread, that is, an inverted yield curve”.

At the end of the article, Richter adds:

“Some observers have pointed out that the current inversion of the yield curve is tied to the long period of near zero interest rates around the world, which is pulling down yields and therefore showing a warped picture of the yield spread not fit as an indicator.”

I agree with this last statement. I believe times are changing, and change is accelerating. Some correlations from the past may not apply, or at least as sharply as they did in the past. That being said, there are other signs of a looming global recession, which would certainly impact the U.S. economy and the hotel market especially. Germany posted negative growth in Q1 2019; if it’s economy remains in negative territory for Q2, as the data comes out, then Germany will officially be in a recession.
Hotels are under pressure from rising costs from franchisers, labor, and construction costs for new hotels. One hotelier recently told me he worries that the margins are now too thin; when a downturn hits, some, maybe many hotels, will not be able to maintain a profitable status.
It would be wise, even as the U.S. economy hums along, for hotel companies to be proactive now, to sharpen their pencils and drive more to their bottom line.
To that end, exploring what new technologies may be available to aid in that endeavor makes sense. After a recent demo of Hotel Investor Apps E.R.P. & Accounting platform to a large hotel company, the COO said, “This is surprising functionality!“.
If you are not entirely thrilled with the advancements of your current hotel accounting software, or just wondering if there might be something better out there, do yourself a favor and simply have a demo of Hotel Investor Apps E.R.P. and Accounting Platform. I believe that you, like that COO, will also be surprised at what the latest technology can do to automate and simplify your accounting team’s work. As a hotel owner, get data, reports, and actionable intel more quickly and with less effort than ever before, all at a cost that will make you smile in your sleep! Actionable intel that will let you control and reduce costs, better foresee and drive future revenues, and increase your bottom line so that you don’t have to worry about what will happen to your hotels if or when the next recession hits.
That’s what Hotel Investor Apps can do for you. Visit https://hotelinvestorapps.com

Till’ Next Time,

– Charlie Fritsch