CBRE is forecasting RevPAR growth to recover in 2024 as inbound international travel further improves and sector-specific headwinds moderate.
The company forecasts 3.0% RevPAR growth next year, driven by a 40 basis-point (bps) occupancy improvement and a 2.3% ADR increase. RevPAR in 2024 is expected to be 14% greater than 2019 levels.
CBRE’s baseline forecast anticipates 0.8% average GDP growth and 2.9% average inflation in 2024. Given the strong correlation between GDP and RevPAR growth, stronger or weaker economic growth will directly impact lodging industry performance.
“U.S. hotel operators faced stiff headwinds to demand and pricing power over the summer due to the number of Americans who elected to vacation overseas, go on cruises or stay in short-term rentals or other alternative forms of lodging,” said Rachael Rothman, head of hotel research & data analytics, CBRE. “We expect RevPAR trends to improve modestly as we head into 2024, as these headwinds ease and the number of inbound international travelers further recovers.”
In Q3 2023, demand declined for the second quarter in a row as ADR growth was the slowest since the post-pandemic recovery began in the first half of 2021. Softer-than-expected demand and more modest pricing power resulted in RevPAR declining 0.3% nationally, the first quarterly decline during the post-pandemic recovery cycle.
“It is uncommon for U.S. hotel performance to weaken when economic growth is resilient and consumers are spending at record levels,” said Michael Nhu, senior economist and head of global hotels forecasting, CBRE. “However, we are optimistic that the eventual return of more than 4.7 inbound international travelers will boost occupancy and pricing power back toward their historical trend lines.”
The best-performing lodging location type in Q3 2023 was urban, where occupancy improved 110 bps to 70.3%. Airport occupancy was stable at 71.9%, while occupancy fell at suburban, town, resort and interstate properties. Occupancies at all location types were below 2019 levels in Q3 2023.
The November 2023 edition of Hotel Horizons for the U.S. lodging industry, covering 65 major markets, the six hotel chain scales and six location types, can be found HERE. CBRE’s baseline forecasts do not contemplate an international war or a pervasive recession. The company also produces forecasts based on upside and downside scenarios.
