CBRE: Some Markets Deteriorate as Hotel Sector Prospers

The U.S. lodging industry could achieve record occupancy level this year, but an increasing number of local markets reflect growing competition, said CBRE Hotels, Atlanta.

“We always caution our clients to pay closest attention to local market conditions as opposed to broad national trends,” said CBRE Hotels’ Americas Research Senior Managing Director R. Mark Woodworth. “While the outlook for the overall U.S. lodging industry is solid for the next few years, we acknowledge that a growing number of local markets will begin to experience a decline in occupancy levels.”

Woodworth called the trend “the result of the emergence of new competition that heretofore has been kept under wraps.”

For the time being, U.S. hotels continue to see strong bookings growth, with 20 of the top 25 markets showing committed occupancy growth compared to last month, reported TravelClick Inc., New York.

“While the financial markets remain highly volatile, it’s encouraging to see that the North American hotel market continues to grow at a steady pace,” TravelClick Senior Industry Analyst John Hach said. He noted that the group and transient leisure markets remain relatively strong and resilient, but said companies now “closely manage” corporate travel expenses.

While only seven of the 59 markets CBRE Hotels tracks suffered occupancy declines last year, that figure could increase to 29 in 2016 and 38 in 2017, the firm predicted.

“Declining levels of occupancy may cause some industry participants to sound the panic alarm,” Woodworth said. “However, it is important to note that the underlying strength of the U.S. economy continues to generate the desire and need to travel…Any hint of a slowdown can be attributed to the influence of the new supply, which is to be expected given where we are at in the lodging cycle.”