Forecasts See Modest Hotel Market Growth

The U.S. hotel industry should see continued “modest” growth through 2018, said separate reports from STR and Fitch Ratings.

“Demand growth exceeded forecasts during the second quarter, which falls in line with reports that tourism has surpassed expectations,” said STR President and CEO Amanda Hite. “That led us to lift our revenue per available room projections for total-year 2017 even with weaker-than-expected average daily room rate growth.”

Hite said lack of ADR growth could become a bigger issue next year when occupancy is forecasted to decline. “Regardless, industry performance should stay healthy with moderate rate growth pushing RevPAR levels to all-time highs,” she said.

Fitch Ratings, New York, predicted RevPAR growth will decelerate in second-half 2017 but remain “modestly positive” in the low single digits through 2018.

“Leading hospitality demand indicators are generally positive,” said Fitch Analyst Stephen Boyd. “The index of leading economic indicators is positive and stable.”

Fitch predicted U.S. GDP will grow 2.1 percent in 2017 and 2.6 percent in 2018. “Consumer confidence and employment trends remain positive for lodging demand. Rising interest rates are a concern, particularly given that the flattening in the yield curve has caused the New York Fed’s probability of recession index to increase,” Fsaiditch’s What Investors Want to Know: U.S. Lodging report.

Currency remains a hotel-sector “headwind” that could reduce inbound international visitation and prompt more U.S. citizens to travel abroad, Fitch noted. Currency-adjusted U.S. hotel average daily rates reached a new high in March, primarily due to a strong U.S. dollar. And rebounding oil prices could lead to higher airline fares and gas prices, which would limit travel and hotel stays.

Supply growth recently returned to its 2 percent long-term average, Fitch said. It predicted supply growth will remain at or above demand for the balance of this upcycle. The number of rooms under construction is “moderately” below its prior cycle peak, but the pipeline is 27 percent above its prior peak when rooms in final planning are included, the report said, noting elevated new hotel guest room supply concerns in some markets including New York, Nashville, Tenn., Seattle, Dallas and Miami.