CBRE Hotels Research has released its U.S. Hotels State of the Union and has reported an elevated risk for the second half of the year.
The report offers a pictorial review of current hotel trends, leading and coincident indicators of hotel demand, and an update on cost pressures and margin flow-through. The report showcases current demand trends, as well as fundamentals by segment, location type and chain scale. The report also provides a brief update on short-term rental, group business, and capital market trends, the transaction market, the impact of virtual work and the outlook for office vacancy.
- Macroeconomic headwinds and leading indicators highlight an elevated risk to the back half of 2022 and 2023. However, to date, overall fundamentals continue to outpace 2019.
- Hotel wage growth continues to outpace retail wage increases. For now, ADR growth will exceed wage inflation.
- In May, the pace of the international travel recovery slowed slightly in the east but continued to improve in the west. Countries in Europe and South America continue to be among the top 10 border entrants.
- Despite of improvements in ADR and occupancy, RevPAR recovery continues to be driven primarily by ADR growth.
- Recent hotel performance is strong. Overall RevPAR continued to exceed 2019 levels in May with interstate, small town, suburban and resort hotels all exceeding 2019 levels. Urban and airport hotels remained below 2019 levels.
- Gross operating margins remain well above 2021 levels. However, elevated inflation may be limiting margin expansion.
- The supply outlook continues to face headwinds caused by labor shortages, wage pressures and supply chain issues.
- Lodging delinquency and CMBS special servicing rates continue to improve along with revenues.