New 2018 forecasts for the U.S. hotel industry project
continued growth, though at a slower pace than in recent years.
CBRE's most recent forecast pegs 2018 average daily rate growth
at 2.3 percent and, despite a projected imbalance in supply and demand,
predicts occupancy will edge up 0.1 percent year over year. "The limited
growth rates may be disappointing or even troubling for some industry
participants," said Mark Woodworth, senior managing director of CBRE
Hotels' Americas Research. "However, 2018 will mark the ninth consecutive
year of rising occupancy, something we have not seen since the 1990s."
PwC, meanwhile, projects 2018 ADR will grow a more modest
2.1 percent year over year and occupancy will decline 0.1 percent. The forecast
anticipates both supply growth and demand growth will peak during the first
quarter of 2018 and taper out for the remainder year. PwC predicts supply will
crest at 1.9 percent and demand at 1.8 percent.
STR forecast ADR will grow 2.5 percent and occupancy will
decline 0.2 percent. It projects supply growth of 2.1 percent and demand growth
of 1.9 percent.
The outlook for the industry continues to be marked by
uncertainty related to consumer confidence, employment levels, GDP growth and
U.S. governmental policy. Additionally, increasing labor costs are expected to
continue to weigh on hotel profit margins. "In a low revenue-growth
environment, it is a struggle to grow profits," Woodworth said. "This
is especially true given the labor shortages and resulting upward pressure on
compensation rates that our clients are reporting to us."
CBRE projects revenue will increase 2.3 percent, but at that
rate, expense growth would need to stay below 3.7 percent in order for profits
to rise, Woodworth said. "With the average hourly compensation rate for
hospitality employees currently increasing at a pace of 4.1 percent and labor
costs comprising roughly half the costs of a hotel operation, you can see how
the math becomes challenging."
Nevertheless, Woodworth said, the challenge is
not a new one for hoteliers, and he expects hotel operators will be able to
manage costs in order to grow profit once more in 2018.