NATIONAL REPORT — CBRE has downgraded its U.S. RevPAR growth projections for the rest of 2024 following a weaker first quarter
than was expected.
CBRE’s
latest forecast calls for 2% growth in U.S. RevPAR for 2024 (its
original annual projection in February called for 3% growth). The company expects
RevPAR to return to positive territory (it was off 2.1% year-over-year in the first quarter), especially in the second half of the year, due to increasing international tourist arrivals and holiday travel, and limited supply growth.
“We
anticipate modest growth over the next few quarters, supported by a continued
uptick in visitors from overseas and election-related events, such as political
party conventions,” said Rachael Rothman, CBRE’s head of hotel research and data
analytics.
CBRE now
also forecasts GDP growth of 2.3% for the rest of 2024 (it originally projected
1.6% in February) and average inflation of 3.2% (its original projection was
2.5%).
The forecast
calls for RevPAR to hit a nominal record of $101.20 in 2024, which would be
115% of pre-pandemic levels in 2019. The forecast also calls for ADR growth of
1.7% and occupancy growth of 0.2%.
“Slower
RevPAR growth reflects softer demand, stickier inflation and high interest
rates,” said Michael Nhu, senior economist and CBRE’s head of global hotels
forecasting. “People have already spent a significant portion of their
pandemic-era savings, and on top of that, the lingering inflationary pressures
are putting a strain on discretionary spending, especially for more
price-sensitive consumers.”
The CBRE
forecast also calls for muted supply growth of just under 1% in 2024 because of
the elevated financing and construction costs. Hotel supply is projected to
have a compound annual growth rate of 0.9% over the next three years.
Q1
summary
CBRE said a
1.4% year-over-year decrease in U.S. hotel demand and a 0.6% increase in supply led
to a 2% drop in occupancy in the first quarter. In addition, ADR declined
slightly (-0.1%), which caused RevPAR to decline by 2.1% YOY (see chart).
The drop was
caused partially by the timing of the Easter holiday (which fell in the first
quarter this year compared to the second quarter last year). CBRE also said
hotel demand continues to be pressured by other lodging sources, including
short-term rentals and cruise lines.
Hotel industry wage growth in the U.S. also accelerated in the first quarter to 5.5% compared to 4.9% in the fourth
quarter of 2023 and outpaced the national average of 4.5% for all industries.
CBRE said
half of the top 10 RevPAR growth markets in the U.S. were in smaller secondary metros, with
West Coast markets like Seattle and San Jose posting strong year-over-year
gains. Baltimore and Long Island, New York, had the largest RevPAR gains in the
first quarter (see chart).
In the first
quarter, occupancy rates for all U.S. location types were below 2019 levels, with
interstate and town locations at 99% of 2019 levels and urban locations at 92%.