U.S. hotel occupancy is expected to remain flat in 2019 and to decline in both 2020 and 2021, as increased supply will outpace limited demand growth, according to the latest CBRE Hotels Research lodging report. The occupancy rate for 2018 was 66.2 percent, and it's projected to stay there for 2019. CBRE expects it to decline to 65.7 percent in 2020 and to 64.6 percent in 2021.
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"Given the cyclical nature of the lodging industry, it is expected that hotel owners will realize a bit of a slowdown after 10 consecutive years of occupancy expansion, said CBRE Hotels Research senior managing director Mark Woodworth. The fact that occupancy remains above the 1998-through-2018 U.S. average of 62.5 percent and is expected to remain above the long-run average through 2023 "provides a cushion should economic and market conditions take a severe turn for the worse."
Supply and demand growth will remain even at 2 percent in 2019, but in 2020, CBRE projects supply growth, at 1.9 percent, to outstrip demand growth, at 1.1 percent. CBRE expects supply growth to dip to 1.8 percent in 2021 while demand growth will plummet to 0.1 percent, as GDP is forecast to decelerate. GDP will rise 2.2 percent in 2019, 0.7 percent in 2020 and 1.4 percent in 2021 before growth accelerates back to 2.7 percent in 2022 and stays there in 2023. CBRE anticipates this rebound to result surge in lodging demand above the increase in supply for 2022 and 2023, when "occupancy levels will once again surpass the 66 percent mark," Woodworth said.
In addition to supply outpacing demand, about half the 105,000 rooms set to open in 2019 are concentrated in just 17 of the nation's major markets. In those markets, average daily rate growth will remain below the pace of inflation each year through 2022, while it will grow faster than inflation in markets with limited supply growth. CBRE projects overall U.S. ADR to increase 1.9 percent in 2019.
Declining occupancy combined with muted ADR growth means limited increases in revenue per available room. CBRE projects RevPAR will grow at or just below 2 percent in 2019 and in 2020. But given the anticipated economic slowdown, CBRE expects this measure to decline by 0.5 percent in 2021, the first such decline since 2009, before rebounding in 2022 and surging in 2023, when it is projected to increase 3.8 percent.
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