Heading into 2019, group and corporate travel stays will be a
consistent source of demand growth for hotel rooms in the U.S., according to
STR VP Vail Ross, speaking on a panel Tuesday at the Americas Lodging Investment
Summit. "One of the things that
is helpful for 2019 and we saw in 2018—we really saw the group demand start
to come back, and we do foresee that staying there." Groups and corporate travelers won't be enough, however, to
stave off the slowing demand growth for the U.S. hotel industry overall, according
to the latest forecast from STR and Tourism Economics.
STR and Tourism Economics have downgraded their 2019 forecast for the U.S.
hotel industry, now pegging year-over-year demand growth at 1.9 percent,
compared to prior guidance that projected 2019 growth to hit 2 percent. This is
the second consecutive downgrade in the 2019 outlook since August. The
researchers expect demand to slow further in 2020 to 1.7 percent.
Supply growth also will slow to 1.9 percent in 2019 and 2020
respectively, leaving occupancy rates flat in 2019 at 66.2 percent and then dipping to
66.1 percent in 2020.
This year, the average daily rate for a hotel room in the
U.S. will rise 2.3 percent year over year to $132.81. The luxury segment is
projected to post the strongest ADR growth at 2.5 percent. The report projects luxury
ADR growth to continue in 2020, gaining another 2.2 percent to $135.68.
Overall RevPAR growth will slow to 2.3 percent in 2019. All segments will see growth for this metric, but it will be anemic compared to the
2.9 percent growth for the industry in 2018 and 2017, which was already the lowest
annual RevPAR increase for the U.S. hotel market since 2009. Researchers expect
RevPAR growth will sputter to 1.9 percent in 2020.
STR president and CEO Amanda Hite attributed the weaker
forecasts to macroeconomic conditions. "Combine more pressure on occupancy
levels with already subdued pricing confidence, concerns over labor costs, a
cooling economic environment and the negative sentiment brought on by the
recent government shutdown, and you have a recipe for diminished RevPAR
growth."
Speaking on the ALIS panel, Kalibri Labs co-founder &
CEO Cindy Estis Green noted the impact of online travel agencies on corporate and
group rates and the resulting pressure on RevPAR: "The transparency of the online marketplace has brought
[average daily] rates down. That means in the group space and the corporate
space, you've got corporate travel managers and meeting planners who are
looking at OTA rates as a reference point so there is a tremendous amount of
downward pressure on the rates." To drive RevPAR, she said, hotels need a
better strategy for managing the customer mix.
Ross said group and corporate stays show the best
opportunities for hotels to maintain their desired ADR growth and occupancy
growth rates. "If you dive even deeper and look at the performance of
weekday versus weekend [demand], that weekday performance is also incredibly
strong and is continuing to be strong, which would indicate groups, your
corporate traveler, your business traveler is continuing to show up. Understanding that mix and seeing those opportunities are really
where we have the most potential to keep that ADR growth and occupancy growth
where we want it. That is one of things that is quite hopeful
that we are seeing as we move into 2019," she said.