STR, Tourism Economics: ‘Slower but Steady’ Hotel Sector Growth

The U.S. hotel industry will likely see “slower but steady” growth through 2018, reported STR, Hendersonville, Tenn., and Tourism Economics, Philadelphia.

“Demand has outpaced supply in terms of growth for seven consecutive years, but we expect that to change in 2017 and continue in 2018,” said STR President and CEO Amanda Hite. “In an environment where occupancy is flat or slightly declining, average daily rates are the lone driver of revenue per available room, which is why we expect RevPAR growth in 2017 and 2018 to be slower than the industry average of the past 30 years.”

Hite noted that RevPAR growth averaged 3.3 percent over the past three decades. She said the hotel industry’s 2 percent expected supply growth this year will outpace 1.7 percent expected demand growth this year, causing hotel occupancy to decline 0.3 percent. The firms expect similar performance projections in 2018.

“That said, growth of any rate continues to push industry performance to all-time highs,” Hite noted.For 2017, the hotel sector will likely see a 0.3 percent decrease in occupancy to 65.3 percent, a 2.8 percent rise in average daily rate to $127.34 and a 2.5 percent increase in RevPAR to $83.20, STR and Tourism Economics predicted. RevPAR grew more than 3.0 percent for each year from 2010 to 2016.

For 2018, STR and Tourism Economics project that hotels will see a 0.2 percent decrease in occupancy to 65.2 percent, but ADR could increase 2.8 percent to $130.95 and RevPAR could grow 2.6 percent to $85.36.

Some analysts have a slightly more optimistic view for the hotel sector. “After overcoming an inconsistent reservation pace and tepid growth during the latter part of 2016, North American hoteliers can feel confident about the start of 2017, as the first two quarters are showing stronger and more consistent growth,” said TravelClick Senior Industry Analyst John Hach.

Hach said TravelClick examines hotel reservations currently on the books in the 25 largest North American markets. “The second quarter continues to build upon the first quarter’s growth,” he said. “This is promising news, especially for the transient business segment [as opposed to group reservations], which struggled for growth throughout much of 2016.”