If
the projection holds up, that increased RevPAR would be 13.2% higher than in
2019. CBRE also forecasts GDP growth of 1.6% and inflation of 2.5% in 2024.
There is typically a strong correction between GDP and RevPAR growth.
We
asked Rachael Rothman, CBRE’s head of hotel research and data analytics, about
the return of international inbound, the call for muted supply growth and the
normalization of leisure travel.
Hotel Investment Today (HIT): What are you seeing from the data
for the optimism of international inbound travel coming back next summer?
Rachael Rothman: We have seen
continued improvements in inbound international travel. In Q4 2023, inbound
international travel was 85% of 2019’s levels, which is a steady improvement
over the level in Q1 2023 (70% of 2019’s levels).
We expect urban hotels to outperform resorts over the next few years, as inbound international travel tends to skew urban; however, we still expect resort growth to be positive going forward.
Rachael Rothman
Recent
trends suggest that travelers from the Caribbean and Europe into the U.S. have
made nearly a full recovery. However, travel from China and Japan continues to
lag at just 46% of pre-pandemic levels. We do not expect a full recovery in
inbound international travel from China and Japan until at least 2025.
HIT: Why did CBRE call for muted supply growth, and will
it lessen later in 2024 (assuming interest rates come down)?
Rothman: CBRE expects interest rates to begin declining in
the second half of 2024. Over time, the moderating of interest rates should
facilitate more development. However, interest rates are just one component of
cost. Just as important is the significant increase in construction costs over
the last four years, the fact that many publicly traded hotel REITs are trading
at a discount to replacement cost and moderating hotel profits, in many cases,
will all be headwinds to new construction for the foreseeable future.
Given
the long lead time for development, we expect supply growth to remain below the
long-term historical average of approximately 1.6% for the foreseeable future.
HIT: What are your expectations of leisure travel as it
normalizes?
Rothman: RevPAR at resort hotels declined by 0.3%, and
markets like Miami declined in the mid-single digits in 2023. This is in large
part because U.S. travelers ventured abroad in 2023, with outbound
international travel reaching 114% of 2019’s levels in Q4 2023. We expect urban
hotels to outperform resorts over the next few years, as inbound international
travel tends to skew urban; however, we still expect resort growth to be
positive going forward.