CBRE U.S. Hotels State of the Union January 2024 - CBRE Now Expects 1.2% GDP Growth in 2024, Eliminating Recession Call

CBRE U.S. Hotels State of the Union January 2024 Edition

CBRE U.S. Hotels State of the Union January 2024 Edition

Key Takeaways:

• Economy

  CBRE now expects 1.2% GDP growth in 2024, eliminating recession call.
  The stronger GDP growth outlook is predicated on four Fed interest rate cuts, moderating inflation, and 0.7% employment gains.

  Excess savings declined, and checkable deposits decreased.
  Excess savings have declined over 60% since January 2023, and checkable deposits declined 13% in Q3 2023 Y-o-Y. Despite these declines consumer leverage remains in check on both a real and nominal basis, and wages are outpacing inflation.

  Credit spreads have pulled back from post-pandemic highs.
  Spreads and interest rates have both declined year-over-year, pulling back to 151 bps and 90 bps, respectively; however, they are still well above pre-pandemic averages.

• Current Trends

  Short-term rentals continue to take share from hotels.
  Hotel demand growth declined 2.1% in November, while short-term rental demand rose 8.0%. However, pandemic-fueled occupancy gains for STRs have been erased, causing RevPAR to decline by 4.3%.

  The gap between inbound and outbound international travel persists.
  The gap between inbound and outbound international travel widened to 33.3 percentage points in November, with some West Coast markets experiencing a noticeable pullback during the month.

  TSA throughput is up 7.9% December month-to-date.
  MTD, TSA throughput is running 101%of 2019, and it’s up 7.9% year over year. Demand for alternative lodging sources like cruises and short-term rentals continued to outpace hotel demand.

• Food for Thought

  November RevPAR declined 1.7% on a 2.8% decline in occupancy.
  RevPAR contraction in the lower price tiers contributed to overall RevPAR declines. Urban hotels were the only location type to post positive RevPAR growth during the month.

  RevPAR in more markets experienced contraction versus growth in November.
  52% of 65 Hotel Horizons markets experienced declining RevPAR in November, up from 49% in October and 42% in September.

  GOP margins contracted in October as wages continued to increase.
  Despite a 2.6% increase in total revenues, GOP margins contracted 1.3 percentage points, resulting in a 0.6% decline in GOP dollars. We expect margins to continue to be under pressure in 2024.

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