Hotel Investment Today caught up with STR President Amanda
Hite for more color on the reforecast and she said the bifurcation of demand
between the upper tier the lower tier continues with luxury and group business
leading the way at the higher end of the market.
Depending on how you want to look at it, supply growth
remains muted, which helps with overall performance, but there is even more
pressure on expenses with labor costs picking back up again.
Here is more of what Hite had to say about current
performance trends:
Hotel Investment Today (HIT): Give us a summary of what the
reforecast means?
Amanda Hite: The RevPAR reforecast has not gone negative,
and I don’t think it is as bad as what people expected.
In January, we were pretty conservative coming in at +1.8%
RevPAR growth and we thought there was a lot of upside to that forecast based
on a new administration and policies. That obviously never took hold. If the
tax bill passes, yes, maybe you get some more spending, but not really. At this
point, because of the tariff overhang, businesses are waiting to see what’s
actually going to happen. That’s really holding things back in the overall
economy, but certainly for our industry, also, it’s impactful.
HIT: Where is the strength in the U.S.?
Hite: The Top 25 markets in the Northeast are where the
growth is happening. So, it’s New York, Philadelphia, Boston.
If the tax bill passes, yes, maybe you get some more spending, but not really. At this point, because of the tariff overhang, businesses are waiting to see what’s actually going to happen.
Amanda Hite
Luxury definitely has lots of strength and the divergence
between the upper tier and the lower tier is probably broadening a little more.
Overall, when you look at demand, we’re stronger year to
date at +1.4%. Last year, it was negative at this point. So, we’re stronger
than it feels from a demand standpoint… We’ve had positive demand growth but
it’s definitely slowing and more in that select-service segment.
For business travel, we’re not seeing huge cuts. We’re not
seeing big declines in weekday. It has remained strong with a lot of group
business that’s helping.
Group is still coming in and the luxury side is definitely
strong. We expect that to continue. Our forecast for the luxury segment this
year is +3.4% for RevPAR. So, by far,
luxury is head and shoulders above every other segment.
HIT: Any ‘green shoots’ for upside?
Hite: Where we see lots of good growth is when we have top
tier events that are happening across the country. That draws demand. It is
what we had been experiencing already for the last year. So, that’s where you’re
going to see good demand.
HIT: Can you go a little deeper on group demand data?
Hite: For the first quarter of 2025, group was at 23 million
room nights, which is ahead of last year and we’re almost back to 2019 numbers.
We were at 22.2 million last year.
On the transient side, we’re ahead of last year, and we’re
well ahead of 2019.
HIT: We’re hearing about a rebound in San Francisco. What
can you tell us?
Hite: That’s where group has been super strong. It’s the
strongest performing Top 25 market from a RevPAR growth perspective. It’s
leading the way… It has had a bunch of big groups and that’s what’s drove their
growth in the first quarter.
HIT: What about New York City?
Hite: Everyone has worried about New York because of
international inbound. And obviously New York’s impacted by international, but
overall international inbound is a small portion of overall hotel demand in the
country. So, New York continues to perform well.
Just anecdotally, what I’m hearing is if you haven’t broken ground, they’re going to wait and see what’s happening with tariffs before they do. I’m sure that’s not across the board for everyone, but most people are not putting things under construction right now.
Amanda Hite
ADR in New York continues to grow strong. I mean, ADR is
what’s driving our growth everywhere and that’s how we are getting RevPAR
gains. We knew that that would be the case this year.
But ADR, in general, is not keeping up with the pace of
inflation. So, that is putting pressure on the profitability side of the
business. It’s not good. It’s really tough. The pace of expenses is growing
faster than revenues. It’s not keeping up with inflation. So, GOP across the
country is down from this year from last year.
If you’re in a market that’s not Top 25, you have softening
demand and rising expenses. It’s there where you’re not making any more money.
HIT: How long will muted supply help performance?
Hite: Year over year, the number of rooms going into
planning and final planning are falling right now. Construction starts are
they're slowing. Just anecdotally, what I’m hearing is if you haven’t broken
ground, they’re going to wait and see what’s happening with tariffs before they
do. I’m sure that’s not across the board for everyone, but most people are not
putting things under construction right now.
I was with some investors two weeks ago and there’s a real
concern about the lack of capital coming into hotels. One owner in the room
said, "I’m not investing any money in hotels in the U.S. I’m investing in
Europe, and I’ll invest in other asset classes in the U.S., but not hotels."
I think some people will start to look at office again.