STR, Tourism Economics Hotel Forecast Dips

(Illustration courtesy of STR and Tourism Economics)

STR and Tourism Economics downgraded their hotel sector forecast for the rest of 2024.

The firms downgraded their projected gains in average daily rate by 0.1 percentage point, while holding steady at 2.0% year over year their revenue per available room forecast. The forecast upgraded the occupancy forecast for the rest of the year by 0.2 percentage points.

For 2025, the occupancy growth projection was lifted by 0.2 percentage points, while the forecast for ADR and RevPAR increases were kept at 2.0% and 2.6%, respectively.

“Midscale and Economy hotels are continuing to feel the effect of fewer lower-income travelers,” STR President Amanda Hite said. “On the other hand, high-income households continue to travel, but domestic levels are constrained due to an increase in outbound travel. The stronger dollar continues to pressure international inbound demand, especially as the cost-of-living crisis continues in Europe and airlift rebuilds across Asia Pacific.”

Aran Ryan, director of industry studies at Tourism Economics, noted he expects economic growth to be slower next year. “But with strong household balance sheets, a gradual upswing expected in business investment and moderating inflation, we anticipate a favorable context for moderate travel growth,” he said. “Further gains in international inbound travel, as well as in business and group travel, are also expected to help support lodging demand growth next year.”

The updated forecast calls for annual gross operating profit and earnings before interest, taxes, depreciation and amortization to improve slightly year over year.

“For 2025, higher growth is expected across both metrics due to lower labor costs, which are set to decrease slightly for a majority of the chain scales,” Hite said. “Upper-midscale chains are still expected to maintain the lowest labor costs this year, with 2025 levels forecasted to come in $168 lower than luxury chains.”