February 18, 2022
Inflation affects hotel returns through pricing, substitution effects and interest rates, however most hotels’ returns are not sensitive to low-to-moderate inflation. The inflation effect is only statistically significant in luxury hotels, which seem to benefit from inflation. Hotel returns follow the real economy, and as CBRE EA expects that inflation peaked in Q4 2021, this simultaneous high level of inflation and GDP growth should mean significant returns in luxury hotels. Therefore, luxury hotels emerge as the most likely candidate as a hedge for inflation.

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Bram Gallagher
Sr. Economist
Econometric Advisors
[email protected]