U.S. Hotel Forecast Downgraded

U.S. hotel sector growth is likely to slow this year and next, STR and Tourism Economics said.

STR, Hendersonville, Tenn., and Tourism Economics, New York, projected 2.0 percent overall performance growth for 2019 and 1.9 percent for 2020. In February 2019 the firms predicted a 2.3 percent increase for the year.

“The first quarter of the year came in worse than forecasted on the average daily rate side, and while the indicators point to better performance the remainder of this year, we lowered our revenue per available room projection 30 basis points mostly as a result of first-quarter performance,” said STR President and CEO Amanda Hite.

Hite said the good news is the sector continues to set monthly demand records and occupancy has been a bit better than expected. “Economic momentum is slowing, but consumer confidence and a low unemployment rate should aid more meaningful performance growth as we get into the busy summer months,” she said. “Forward-looking U.S. air travel bookings remain steady and vacation intentions are on the upswing compared to the two previous years.”

The development pipeline could become a challenge for the sector in the future, Hite noted. “Even though supply growth has been gradual on a national level, we’ve already seen the impact of new inventory in major markets and the select-service segments, and construction activity has been up for seven straight months overall,” she said.

In addition, labor costs have outgrown revenue for two consecutive years, which places more pressure on already shrinking hotel profit margins, Hite said.

For full-year 2019, the U.S. hotel industry will likely see a 0.1 percent increase in occupancy to 66.2 percent, a 1.9 percent rise in the average daily rate to $132 and a 2.0 percent lift in RevPAR to $87.65, the STR/TE report said.

The STR/TE forecast for 2020 changed little. The firms project a 0.2 percent decrease in occupancy to 66.1 percent, a 2.2 percent lift in ADR to $135 and a 1.9 percent rise in RevPAR to $89.36. Occupancy in the U.S. has not declined year-over-year since 2009, the report said.

The highest overall RevPAR growth rate, 2.2 percent, will likely be in the luxury segment, while the midscale chains will likely have the lowest RevPAR growth at 1.4 percent, STR and TE said.

RevPAR increased 2.9 percent in both 2017 and 2018, the lowest RevPAR percentage change since 2009, the report said.