NATIONAL REPORT -- Based on its revised outlook for the U.S.
economy, CBRE has published a new report suggesting that it expects 0.5% RevPAR
growth in 2024 and 1.7% in 2025.
RevPAR growth in 2024 and 2025 is primarily driven by growth
in ADR of 0.7% and 1.4% respectively. Occupancy is expected to contract 0.3% in
2024 and remain relatively weak in 2025, increasing only 0.3%. Urban locations,
which lagged in recovery from the pandemic, are again expected to outperform
resort locations in 2025.
CBRE said the pace of inbound international travel recovery
has slowed. Outbound international travel increased to 122% of 2019’s level in
October while inbound lagged at 90%. If the mid-single-digit growth in
visitation continues, it is unlikely that inbound international travel will
recover in 2025. Regionally, inbound travel growth on both coasts has slowed
materially.
TSA throughput increased 0.2% year-over-year in November,
according to CBRE. It TSA continues to be well above pre-pandemic levels, but
growth is near zero. Similarly, google search trends for paid and loyalty
redemption travel continued to soften down 5.7% and 1.8%, respectively, in
November.
Current trends
October RevPAR increased 2.7% as demand shifted because of
the election, according to CBRE.
If the mid-single-digit growth in visitation continues, it is unlikely that inbound international travel will recover in 2025. Regionally, inbound travel growth on both coasts has slowed materially.
CBRE
A 1.1% increase in ADR coupled with a 1.5% growth in
occupancy drove performance as election timing impacted results. All chain
scales posted positive RevPAR in October, with outperformance in mid-priced
hotels. Similarly, all location types showed positive growth except for
resorts, which continued to normalize.
Short-term rentals (STRs) continued to take share from
hotels, with demand growing 7.4% compared with a 0.8% increase in hotel demand.
RevPAR growth for STRs was strong, up 8.5%, with ADR and occupancy increasing
to 130% and 100% of 2019 levels, respectively, in October.
Total hotel revenues grew 1.8% in Q3 2024 in line with the
YTD trend of 1.9%.
Despite positive total revenue growth in Q3, a 0.7 p.p.
contraction in GOP margins led to a 1.1% decrease in profit dollars for the
second year in a row. Growth in expenses like wages, insurance, and property
taxes continue to outpace total revenue growth but growth rates appear to be
moderating.
Macroeconomics
CBRE revised its 2025 GDP growth estimate from a
below-average 1.7% to an above-average 2.3%. Inflation is expected to be more
persistent with a reacceleration to 2.5% in 2H25. The Fed Funds Target Rate is
now expected to decrease by 80-110 bps by year-end 2025.
Employment growth and wage gains are moderating, according
to CBRE. In October, employment growth grew 1.4%, down from 1.9% growth a year
ago, while wage growth remained roughly 4%, around 139 bps higher than
inflation. Real disposable income rose steadily at 2.7%, which could mean that
consumers have discretionary income to spend on travel.
CMBS rates declined despite flat credit spreads. Credit
spreads remained at 1.8 p.p. y/y, but CMBS rates dropped to 7.6% from 8.6% a
year ago, according to CBRE. On a T3M basis, CMBS loan issuance increased
four-fold from $500 million in October 2023 to $2 billion in October 2024. The
T3M loan count increased from 12 to 36, and the average loan size increased
from $42.2 million to $54.9 million over the same time period.