Following "stiff headwinds" to U.S. hotel demand and pricing power this year, CBRE Hotels Research has lowered projections for 2023 revenue per available room but foresees improvement in 2024 as challenges moderate and international travel increases, the company said Thursday.
Some of those headwinds to demand and pricing power this summer included yet-to-recover inbound U.S. travel and Americans opting for "short-term rentals or other alternative forms of lodging," Rothman said. CBRE head of hotel research and data analytics Rachael Rothman said in CBRE's November Hotel Horizons report.
CBRE now projects 2023 RevPAR of $96.34, up 3.8 percent year over year but down about 31 cents from its previous forecast in August.
CBRE's also lowered projected 2023 average daily rate from its prior forecast. The company now expects 2023 ADR to increase 3 percent year over year, down from its previous forecast of 3.6 percent. These lower rate expectations result from decreased occupancy levels, according to the report.
In Q3, "demand declined for the second quarter in a row as ADR growth was the slowest since the post-pandemic recovery began in the first half of 2021," according to CBRE. "Softer-than-expected demand and more modest pricing power resulted in RevPAR declining 0.3 percent nationally, the first quarterly decline during the post-pandemic recovery cycle," the company said.
However, CBRE is "optimistic" that inbound international travelers will "boost occupancy and pricing power back toward their historical trend lines," CBRE head of global hotels forecasting and senior economist Michael Nhu said in the report.
Looking Ahead
CBRE forecasts 2024 RevPAR to increase 3 percent year over year, driven by higher occupancy and ADR. CBRE projects 2024 RevPAR to exceed 2019 levels by 14 percent.
As for ADR, CBRE expects 2024 daily rates will increase 2.3 percent year over year. Occupancy also is projected to rise as CBRE forecasts it to increase year over year by 40 basis points in 2024.
These expectations are based on CBRE's hotel KPI data as of Sept. 30 and macroeconomic forecasts as of mid-October, the company said.
RELATED: CBRE's Q2 report