CBRE Forecast Calls for Hotel Growth to Improve in Late 2024, Early 2025

(Illustration courtesy of CBRE)

U.S. hotel performance should start to accelerate soon despite a sluggish summer and third quarter, according to CBRE, Dallas.

CBRE now forecasts a 0.5% increase in revenue per available room growth for full-year 2024, down from the previously estimated 1.2% in August. This revision reflects a 40-basis-point decrease in expected occupancy compared to the prior forecast, with occupancy anticipated to decline by 30 basis points year-over-year.

But RevPAR growth is expected to accelerate beginning in Q4 2024, supported by recent interest rate cuts, easing inflation and rising stock market trends, CBRE forecast.

CBRE forecasts average daily rates will increase by 0.7%, a 40-basis-point reduction from earlier projections.

Rachael Rothman, head of hotel research and data analytics for CBRE, noted U.S. hotels performance was softer than expected during the summer months, partly due to Americans traveling overseas in record numbers. “At the same time, the slow recovery in inbound international travel has created an imbalance in U.S. leisure demand,” she said. “Despite this, continued improvements in group and business travel served as relative bright spots in the third quarter.”

Hotel demand declined 0.1% year-over-year in the third quarter, coupled with a 0.6% increase in supply, resulting in an approximately 0.8% decline in occupancy. Modest ADR growth of 0.6% fell short of CBRE’s previous expectation of 1.6%, leading to a 0.2% decrease in RevPAR for the quarter.

CBRE forecasts a compound annual growth in supply of 1% over the next five years, well below the industry’s 1.6% long-term historical average.

The forecast includes GDP growth of 2.6% and average inflation of 2.9% for 2024. The lodging industry’s performance is closely linked to economic strength, as there is typically a strong correlation between GDP growth and RevPAR. “Given current macroeconomic and geopolitical uncertainties, CBRE advises clients to evaluate and incorporate various economic and hotel performance scenarios in their models based on their risk tolerance and probability weightings,” the report said.