CBRE is reducing its forecast for hotel performance this year, as weaker-than-expected summer demand resulted in a shortfall in Q2 2023 revenue per available room (RevPAR).
Despite projections of persistent inflation and a moderate economic recession, CBRE’s November 2022 Hotel Horizons® forecast calls for a 5.8% increase in rooms revenue per available room (RevPAR) in 2023. This is up from CBRE’s previous forecast of a 5.6% increase in RevPAR for 2023.
According to CBRE’s September 2022 Hotel Horizons forecast for the overall U.S. lodging industry, rooms revenue per-available-room (RevPAR) will exceed 2019 annual levels in 2022. This is driven by the accelerated recovery of average daily rate (ADR) which first occurred during the third quarter of 2021. Unfortunately for the owners and operators of full-service, convention, and resort hotels, food and beverage (F&B) revenue is lagging in recovery and yet to return to pre-COVID levels.
CBRE now forecasts RevPAR to reach 2019 nominal levels by Q3 2022 under CBRE’s base case scenario, rather than in Q3 2023, as previously forecasted.
Recent trends show emergent signs of weakening; the pace of improvement has slowed in most markets, and we are seeing a reversal in trends overall in others.
The strength in lodging demand will support pricing, but occupancy gains will be somewhat offset by new supply, as fewer development and conversion projects were side-lined than previously forecasted. As a result, the recovery in occupancy will not occur until the fourth quarter of 2025 due to greater supply growth during the 2020 – 2022 period than coming out of prior recessions. The net result is a return of 2019 RevPAR levels in the third quarter of 2024.
Shifts in the depth and timing of an expected slowdown in the nation’s economy have impacted CBRE Hotels Research’s outlook for the U.S. lodging industry over the next few years. According to the September 2019 edition of Hotel Horizons®, CBRE’s forecasts for RevPAR changes in 2019 and 2020 have been adjusted slightly downward, but the outlook for 2021 has improved.
According to the March 2019 edition of CBRE’s Hotel Horizons® forecast report, the 2019 average annual occupancy level for U.S. hotels is projected to be 66.2 percent. This will mark the sixth consecutive year of occupancy levels above the 62.5 percent long-run average, and fifth year above the pre-2014 historical high of 64.8 percent. Despite such healthy market conditions, not all hotels are enjoying lofty levels of performance.
Limited Demand Growth Cannot Keep Pace With Modest Supply Increases, According to Hotel Horizons® June 2019 Edition
Since 2014, U.S. lodging industry owners and operators have seen a steady decline in the pace of revenue growth. In 2014, rooms revenue per available room (RevPAR) increased by a healthy 8.2 percent according to STR. Per the December 2017 edition of CBRE’s Hotel Horizons®, RevPAR is forecast to increase by just 2.5 percent in 2018. Facing lackluster revenue growth, hotelier’s sights are now focused further on down the operating statement to determine what the impact of slow top-line gains will be on bottom-line profits.