Hotel Sector Forecast Lifted for 2018, 2019

The U.S. hotel sector is likely to continue its strong performance through 2019, according to a report from STR and Tourism Economics.

STR, Hendersonville, Tenn., and Tourism Economics, Wayne, Pa., increased their joint projection of future daily hotel room rates by 10 basis points compared to their early-2018 prediction.

“Rarely do we lift our average daily rate projections during our mid-year revisions, but stronger-than-expected pricing power over the last quarter has led us to lift our rate forecast,” said STR President and CEO Amanda Hite. She noted inflation plays a role in ADR growth–inflation-adjusted figures indicate that ADR has remained nearly flat for some time–but she said solid economic conditions and an early impact from the recent tax cuts are pushing growth.

In addition to GDP growth and low unemployment, Hite also noted an “uptick” in wages. “We’ll need to see more in that area to count this as another driver of demand,” she said. “But these are all good signs for the continued health of the [hotel] industry through at least 2019.”

This year the hotel industry is likely to report a 0.6 percent increase in occupancy to 66.3 percent, a 2.6 percent rise in average daily rate to $129.85 and a 3.2 percent lift in revenue per available room to $86.09, the report said, noting RevPAR has grown at least 3.0 percent every year since 2010.

Nearly all of the top markets–22 of the 25 largest markets–are projected to see RevPAR growth for the year, the report said. Most markets should see RevPAR growth below 5.0 percent, but Minneapolis/St. Paul and Miami/Hialeah could see RevPAR growth between 5 and 10 percent. The only large markets expected to see RevPAR decreases are Houston, St. Louis, Mo. and Washington, D.C.-Maryland-Virginia.

The report projects the U.S. hotel industry will see a 0.2 percent occupancy increase during 2019 to 66.4 percent, a 2.4 percent ADR lift to $132.97 and a 2.6 percent RevPAR increase to $88.29. Unlike 2018, Minneapolis could be the only top 25 market projected to see decreasing RevPAR next year. The remaining 24 markets are expected to post growth between 0 percent and 5 percent, the report said. 

Lodging Econometrics, Portsmouth, N.H., reported the pipeline of hotel properties under construction has grown since late 2017. It said the current construction pipeline stands at 5,312 projects totaling 634,501 rooms, up 7 percent from year-end 2017’s 4,973 project pipeline with 598,371 rooms.

“The pipeline has been growing moderately each quarter,” said Lodging Econometrics Senior Vice President JP Ford.

The first half of 2018 saw 434 hotels with 50,476 rooms open in the U.S. with another 652 projects with 75,138 rooms forecast to open by year-end, Lodging Econometrics reported. The full-year 2018 forecast of 1,086 projects with 125,614 rooms is a 10 percent increase over the actual number of hotels that opened last year.