NEW YORK — STR and Tourism Economics have made “significant” downgrades to their U.S.
hotel forecasts for 2024 and 2025, which were driven by lower-than-expected
performance for the first four months of this year.
“We have seen a bifurcation in hotel performance over the
first four months of the year, which we don’t believe will abate soon,” said
Amanda Hite, president of STR. “The increased cost of living is affecting
lower-to-middle income households and their ability to travel, thus lessening
demand for hotels in the lower price tier.”
Hendersonville, Tennessee-based STR and Oxford,
England-based Tourism Economics announced the downgrade on Monday at the NYU
International Hospitality Industry Investment Conference in New York.
Hite said travel remains a priority for most Americans,
but the volume has lessened as prices rise.
“The upscale through luxury tier is seeing healthy
demand, but pricing power has waned given changes in mix and travel patterns
and, to a lesser extent, economic conditions,” Hite said.
Aran Ryan, director of industry studies at Tourism
Economics, said elevated interest rates and easing wage growth have contributed
to cautious business investment and “pinched” spending by middle and
lower-income consumers.
“Looking beyond this near-term pull-back in demand at
lower-tier properties, we expect moderate travel growth to resume, supported by
a tempered economic expansion and the continued rebound of group, business and
international travel,” Ryan said.
The forecast also lowers GOP margins as operating
expenses have continued to rise.
“Labor costs are projected to be nearly 33% of
total revenues through the remainder of 2024 and will have the greatest impact
on GOP margins,” Hite said. “Upper midscale chains are expected to maintain the
lowest labor costs, and thus the most competitive GOP margins, for most of
2024, which follows pre-pandemic trends.”