Forecasts Show Further Slowing for U.S. Hotels

Performance growth projections for the U.S. hotel industry are slipping.

STR, Hendersonville, Tenn., and Tourism Economics, Wayne, Pa., recently updated their joint hotel sector forecast. In August the firms predicted revenue per available room growth would equal 1.6 percent this year and 1.1 percent in 2020. Their new forecast lowers those RevPAR predictions to less than 1.0 percent for both years.

STR President Amanda Hite noted U.S. hotels have posted nine straight years with revenue per available room increases exceeding 3 percent, so growth below 1 percent represents the industry’s worst years since the recession, she said.

“At the risk of sounding like a broken record, the major factor in our revisions continues to be a lack of pricing confidence,” Hite said. “Supply growth is coming in ahead of demand growth a bit sooner than expected, so occupancy levels are slightly lower than projected.”

Hite said STR and Tourism Economics downgraded average daily room rate projections by 80 basis points for 2019 and 60 basis points for 2020. Hotel ADRs have grown below the inflation rate for five consecutive quarters.

“Fortunately, demand is going to continue to grow beyond the record levels the industry has already achieved,” Hite said. “Domestic travel continues to increase with forward-looking domestic air bookings remaining strong. Vacation intentions are also holding above last year’s levels.”

JLL, Chicago, said RevPAR should grow 1.6 percent this year and 1.1 percent next year, with the luxury and economy hotel segments driving RevPAR performance. The JLL Third-Quarter Hotel Capital Markets report reported year-to-date transaction activity is down 13 percent.

CBRE Hotels Research Senior Managing Director R. Mark Woodworth agreed that hotel revenue growth will likely continue to slip but predicted the U.S. lodging sector will remain healthy through the next two years, with U.S. occupancy levels remaining above 65.5 percent through 2021, three percentage points greater than the STR long-run average.

“Despite the 2020 and 2021 forecast performance slowdown, U.S. hotels are operating at near record levels of occupancy and efficiency,” said Woodworth. “The growth story is not great, but we expect the U.S. lodging industry to circle back to 2018 performance levels, and beyond, starting in 2022.”