Is Cooling Ahead for the Hotel Market? - Sachse Construction
Topics: Headlines, Industry News, Investment

Is Cooling Ahead for the Hotel Market?

Citing changes in the depth and timing of an expected slowdown in the U.S. economy, CBRE hospitality experts are predicting a deceleration in demand for hotel guestrooms now through 2020 and have lowered forecasts for RevPAR. The good news is the outlook for 2021 has improved, according to the September edition of Hotel Horizons.

CBRE Hotels Research projects GDP growth to average 1.9 percent during the second half of 2019, or half the pace of the first half of the year. That change led CBRE to project hotel demand to grow by 1.4 percent for the rest of the year, compared to an increase of 2.1 percent for the first six months of 2019. CBRE is now forecasting the national occupancy level to decline by 20 basis points from 2018 to 2019.

Since changes in guestroom rates tend to lag occupancy changes, the annual increase in ADR will remain steady at 1.1 percent, Mark Woodworth, senior managing director of CBRE Hotels Research, said in a prepared statement. But the 2019 demand slowdown should begin to impact ADR in 2020 and so CBRE has lowered its ADR growth forecast to 2.0 percent. An increase in new hotel openings next year is also expected to add to the downward pressure on guestroom rates, Woodworth noted. The 2020 supply growth forecast is 2.1 percent, rather than the long-run average of 1.8 percent. The combination of factors should drive an 80 basis points national occupancy rate decline for 2020, he said.

CBRE has lowered RevPAR expectations to an increase of just 0.9 percent for 2019 and 1.2 percent for 2020. Both figures are lower than the June forecast.

2021 Numbers to Improve

Although noting the economic forecast for 2021 is still a bit anemic with 1.5 percent GDP growth and employment levels expected to decline by about 0.2 percent, CBRE did adjust the 2021 ADR and RevPAR numbers up a bit from its June report. The CBRE forecast now projects a 0.8 percent RevPAR gain, up from the 0.5 percent decline suggested in June.

The September report notes that while CBRE Economic Advisors do expect the U.S. economy to slow down over the next several years with GDP growth rates ranging from 1.5 percent to 2.3 percent through 2022, the team does not anticipate a full-fledged recession. With that in mind, CBRE is forecasting RevPAR to also have low levels of growth ranging from 0.8 percent to 1.9 percent.

Recommended Articles