Why steady, consistent is good news in 2024

Was there anything surprising in the revised forecast?

“It’s not surprising,” Hite said. “Everyone’s asking, do you have good news? The good news is we’re steady and consistent. Things are continuing. All the uncertainty that’s out there is not weighing us down. Things continue to move along.”

The hotel projections were released on the first day of the Americas Lodging Investment Summit (ALIS) at the JW Marriott at L.A. Live in Los Angeles.

STR and Tourism Economics made minor adjustments to the growth projections for their U.S. hotel forecast of 2024. The forecast saw ADR rise 0.1%, while occupancy and RevPAR projections remained unchanged. For 2025, growth projections were downgraded because long-term average trends have stabilized. Occupancy is projected down -0.01 ppts, ADR down -0.3 ppts and RevPAR down -0.5 ppts. STR also anticipates GOPPAR to grow due to improved TRevPAR levels and stable labor costs.

Hotel Investment Today talked to Hite about why the travel economy is doing better than the regular economy, which segments should continue to grow in 2024 and the projections’ expectations for profitability.

Hotel Investment Today (HIT): You said that the travel economy is doing better than the regular economy. Can you explain why that’s the case?

Amanda Hite: We’re measuring the employment and unemployment rates, and in all the job numbers each month, employment continues to grow in the professional sector. College-educated [workers] are the people who are keeping their jobs, and layoffs have not impacted them as greatly. They’re the ones spending and have the disposable income to spend. Households earning $100,000 or more are the households that spend 42% of travel in the U.S. The number of households is expected to grow by 3% this year and next year.

Those are the people who will continue to spend money, and they have prioritized travel. When you look at consumer expenditures, services continue to wait and far outweigh the goods, particularly travel for accommodations and airfare. We don’t see significant impacts from the slowing economy on people’s spending on travel. And that primarily affected the 2024 forecast.

HIT: Can you discuss the changes you see for the segments, and what they mean?

Hite: On the luxury side, the real change there is we see the rate coming down. We started to see that last year… That’s more about probably a business niche shift than necessarily demand… In 2022, it was all luxury leisure travelers, and now you have more of that group or business going in than we had seen before. The rate is coming down because those other customers are paying a lower rate than the luxury and leisure customers… Upper upscale is driven by continued group recovery. We see more demand for upper upscale hotels, which will continue in 2024.

When you look at where the demand grew, in 2023 we saw flat demand. It was up, but just a little bit. All of the demand growth happened in the first quarter of '23. But when you look at what segments we saw demand grow -- it's upper upscale and upscale. That is the business travel and group recovery that we will continue into 2024.

HIT: Is this because revenge travel has gone away?

Hite: It’s the normalization of leisure travel. I guess you could characterize it as revenge travel going away. But we saw that we’re back to normal levels of leisure travel. In 2022, it was way above normal because people were staying in the U.S., and then we saw them leave the U.S. in 2023. But we’re still at normal levels. It’s going to help offset the increased costs. We do feel like profitability will improve slightly... But the wildcard is the rising expenses and costs. We feel like growth in total revenues will help offset that so that we can grow profitability. It’s a slight increase, but it’ll be a little stronger in 2024 than what we saw in 2020.