With the first quarter of 2017 in the books for U.S. hotels,
analysts are feeling pretty good about the industry's full-year outlook—but not
good enough to alter any forecasts. Both CBRE Hotels' Americas Research and PwC
US released updates to their respective industry forecasts that maintained
their prior projections for occupancy, average daily rate growth and revenue
per available room growth.
CBRE and PwC both expect occupancy to end the year at 65.5
percent, the same level seen in 2016. The two differ, however, in their
outlooks on hoteliers' pricing power. CBRE projects ADR growth of 2.9 percent and
total RevPAR of 2.9 percent.
PwC pegs ADR growth at 2.3 percent and RevPAR growth at 2.3
percent. While neither firm changed their metrics this time, these numbers do
reflect the major
forecast changes made in January following a post-election bump at the end
of 2016. "Despite the on-going post-election partisanship, the U.S.
economy currently appears to be on firmer footing, compared to the same period
last year," PwC's hospitality industry leader Scott Berman stated in his
report.
So why hasn't a positive first quarter—the strongest on
record for occupancy, ADR and RevPAR, according to STR—led to an even better
outlook? One major factor is that the negative performance during the first
quarter of 2016, as well as the shift of Easter into the second quarter of 2017
and the volume of political events in January 2017, mean those year-over-year
results should be taken with a grain of salt.
Another facet to consider is the impending imbalance between
supply and demand. PwC expects "peaking supply growth" to put "increased
pressure on pricing power." CBRE's outlook still allows for the strong
demand seen so far in 2017 to hold off that imbalance.
"After so many quarters and years of record-breaking
performance—plus all the new supply, labor and geopolitical challenges—it is
not surprising that industry participants are leery regarding the future of the
U.S. lodging industry," stated CBRE senior managing director Mark
Woodworth. "However, when you take a hard look at the data and scrutinize
issues like seasonality, locational variances and weekday/weekend demand
patterns, you can see where there still is some upside potential." CBRE
forecasts supply growth of 2 percent and demand growth of 2.1 percent. STR
projects supply growth of 2 percent and demand growth of 1.7 percent.
While hoteliers were also optimistic early in the year that
President Donald Trump's administration would usher in regulatory changes and
spur infrastructure investment, an economic forecast from IHS Markit, on which
PwC based its own forecast, "anticipates the Trump administration will
attempt a more modest agenda in 2017 than initially suggested."
The first quarter did embolden some industry
players to alter their 2017 RevPAR guidance. Marriott International changed
its projected RevPAR growth to 1 to 3 percent, up from 0 to 2 percent
growth. The update puts it in line with Hilton's and Hyatt Hotels Corp.'s
guidance. Extended Stay America, too, raised its guidance from 1 to 3 percent
to 1.5 to 3.5 percent.