STR maintains forecast of slight RevPAR gains

Hite added that the demand expectation was raised slightly (+0.1%), while supply came down (-0.1%) point. ADR has underperformed and was adjusted (-0.1%). However, occupancy projections increased for the rest of 2024 (+0.2%) and 2025 (+0.2%).

Overall, she said the positive projections were driven more by rate growth than occupancy. But because of signs like weaker ADR in Q2, there is a risk for this forecast not to come true. “There’s certainly some downside risk to ADR, and that’s what we’re leaning on for most of our growth for the rest of the year,” Hite said. “As we move into 2025, you’ll see a little more occupancy gain in the first half of the year, but rate growth is really going to be the driver for us.”

The forecast was released as part of the Hotel Data Conference in Nashville. Hite was on a panel discussing the state of the industry along with Jennifer Barnwell, president of Bethesda, Maryland-based Curator Hotel & Resort Collection and Daniel del Olmo, president of Denver-based Sage Hospitality Group. It was moderated by Patrick Mayock, vice president of product for CoStar.

When breaking down the forecast by segments for 2024 RevPAR, Hite said most of the growth is coming in upscale (+2.7%) and upper upscale (+3%). She also said while the luxury segment doesn’t have as much growth (+1.6%), the forecast previously had luxury slightly negative for the rest of the year. It was adjusted to slightly positive because of the demand growth.

“For the last five months, the luxury segment has seen demand growth at 8% or higher,” she said. “So, while the RevPAR gains aren’t as strong, the demand growth is there.”

A lack of leisure business growth is holding back the luxury segment from growing anymore, Hite noted, while upper upscale continues to be lifted by group demand. “That’s really been what we’re banking on in terms of demand growth for the year. It’s being driven by the group business,” she said. “Then on the lower end… the lower-tier scales are still negative, but are improving [due to ] less falling demand.”

In terms of wild cards, Hite said it’s hard to think of one that could have positive results, but she can think of several that could have negative consequences. She said preliminary July numbers show demand and rate not being as strong as forecast.

“When you look at total U.S. numbers, there’s not as much opportunity for boom for the rest of this year… I’m not worried about the downside of demand. It’s more about the rate.”

When breaking the forecast down by market, Hite said the top 25 continue to lead the way regarding RevPAR gains. “Top 25 markets make up 36% of the supply, but 45% of the revenue and next year we expect that to be 46% of the revenue,” she said.

The forecast also called for GOP and EBIDTA to improve in 2025 for U.S. hotels, while labor costs are projected to decrease next year.

‘It’s challenging’

Curator Hotel & Resort Collecton from Pebblebrook Hotel Trust markets for independent hotels across the U.S. and Barnwell said the forecast largely matches what she is hearing from owners.

“What we’re hearing from our collection of hotels, which is mainly in the upper upscale and a little bit of the luxury segment, is that it’s challenging and they are looking for every revenue possibility they can capture,” she said. “We’re seeing really good group business… and leisure is okay, but we are seeing that pricing sensitivity in leisure. So, I’m a little bit worried about how that plays out by the end of the year… whether occupancy is just a little bit better and rate is maybe a little bit worse,” she said.

Barnwell said the pace numbers for 2025 look positive so far, especially for group and transient.

For del Olmo, the forecast also tracks with what he’s seeing and hearing from his properties at Sage, especially considering how soft the first quarter was. “Q1 was a dud. If anyone didn’t have a dud in Q1, then come and see me. I would love to understand what you did differently,” he said. “Q2 was a little bit better. Then, when I look at the rest of the year for us, we’re projecting about 3% in RevPAR growth, but again, very limited and a little bit more from occupancy versus rate for us.”