Following "weaker-than-expected" summer demand and U.S. hotel revenue in the second quarter, CBRE Hotels Research has lowered its 2023 revenue per available room forecast and reduced occupancy expectations, the company announced Thursday.
CBRE's revised forecast projects 2023 RevPAR will be up 4.6 percent year over year to $96.64, which is down $1.25 from its previous forecast, issued in May. CBRE's softened RevPAR projections are partially attributed to decreased occupancy expectations and a decline in demand, according to the company.
In Q2, U.S. hotel demand decreased 1.2 percent year over year, which was the "first decline since the post-pandemic recovery began in Q2 2021," the company said.
The revised forecast also extends to average daily rate, as CBRE now projects ADR to increase by 3.6 percent in 2023, which is down 0.1 percentage points from the previous outlook.
Due to lower-than-expected demand and "in-line" ADR growth, according to CBRE, the U.S. hotel industry reported "muted RevPAR growth" at 1.1 percent in Q2 and was below the company's predictions of 4.4 percent. Demand trending down in the U.S. is partially due to increased outbound travel, according to CBRE.
Given the "stronger-than-expected GDP growth in the quarter," senior economist and CBRE head of global hotels forecasting Michael Nhu in the report called the demand decline "somewhat surprising."
"This disconnect in trends suggests consumer preferences have temporarily shifted, as more Americans are traveling overseas, particularly to Europe and the Caribbean, rather than traveling domestically," according to Nhu.
Additionally, "inbound international travelers to the U.S. are still 27 percent below their pre-pandemic levels, causing a temporary imbalance in demand," CBRE head of hotel research and data analytics Rachael Rothman said in the report.
CBRE previously revised its 2023 outlook to raise forecast expectations following "stronger-than-expected" demand in the first quarter.
CBRE's expectations for U.S. hotel supply did not change. The company still projects supply to increase slightly over the next five years but remain below the industry's long-term historical average.