A few weeks later, CBRE published its “U.S. Hotel State of
the Union,” commenting on the overall economy, current trends and some food for
thought about the implications for hoteliers.
Macro economics
More broadly, between 3Q23 and 2Q24, CBRE positively revised
its 2024 GDP forecast from 0.4% to 2.3%, +190bps. Over the same period, CBRE
lowered its hotel demand growth forecast from +1.9% to +0.9%, -100bps. The implication
is that the historical relationship between demand and GDP has broken down
owing to competitive encroachment and lagging inbound international travel.
New economic headwinds, according to CBRE, are the burndown
of COVID savings and increasing credit levels. Excess COVID savings have been
spent, and the personal savings rate has fallen to 3.6%, below the 5.7%
long-term average. Credit card borrowings are now above pre-pandemic levels and
leverage is increasing, another headwind to further growth.
Looking out over the next few months, Google search trend data suggests continued softness for paid, redemption, and all-inclusive travel.
CBRE
CBRE also stated that stabilizing interest rates and
maturities are driving loan issuance. Total loans originated in April 2024
increased 2.5x y/y from $0.4 billion to $1 billion, and the number of loans
increased a little less than two-fold from 23 to 40. The average loan size was
relatively consistent at $19 - $20 million, suggesting smaller deals are
getting done.
Current trends
March/April’s combined -1% RevPAR was slightly below
January/February’s -0.5% trend, but not by much. April standalone RevPAR
increased by 1.7%, benefitting from the shift to a higher business mix. Coming
into the summer months, leisure will be increasingly important.
TSA throughput increased 7.7% year-over-year in May. Increased passenger
volumes have not translated into stronger RevPAR performance at airport hotels,
which were flat on a combined basis in March/April. Looking out over the next
few months, Google search trend data suggests continued softness for paid,
redemption, and all-inclusive travel.
Growth in short term rental demand took a breather in April
due to Easter shift. Given their leisure-oriented nature, short-term rentals
were impacted by the absence of the Easter holiday in April 2024. However, in
general, alternative lodging options continue to outperform hotels, with
short-term rental revenues still well above 2019 levels at 161% compared with
hotel revenues, which reached 118% in April.
Food for thought
A weak Q1 caused CBRE to reduce 2024 RevPAR growth forecast
from 3% to 2%. It expects 2024 RevPAR to be bolstered by a 0.2% increase in
occupancy and a 1.7% increase in ADR, driven primarily by growth in group,
business transient and international travel. Urban and airport locations are
expected to outperform in 2024.
Outbound international travel is still outpacing inbound. Looking
at March and April combined, outbound international travel was 117% of 2019
levels compared to inbound visitation of 86%. While still improving from a year
ago, inbound travel from Japan and China has been leveling off at ~50% of 2019
since August 2023.
March marks the second straight year of GOP margin contraction.
Total revenue declines of 1.0% in March and a 0.6 p.p. contraction in margins
resulted in a 2.6% decrease in GOP dollars. While wage growth has slowed, it
remains above historical averages. Labor costs, insurance expenses, and
property taxes are likely to continue to be a headwind to margins and profits
going forward.