PwC softened its projections for U.S. hotel occupancy in 2023 and 2024 amid economic concerns and an uncertain outlook for corporate travel, according to a report the company released Monday. U.S. average daily rates should increase in each year, according to the company.
PwC projects full-year 2023 occupancy for U.S. hotels to reach 63 percent, up 0.7 percentage points year over year, according to its latest Hospitality Directions outlook. This projection is slightly below PwC's prior forecast of 63.4 percent, issued in May 2023, and reflects declining occupancy numbers during the last half of 2023.
"Occupancy levels have declined in each of the past seven months, relative to comparable 2022 levels, and are expected to continue to be down during the remainder of this year and through at least the first quarter of 2024," according to PwC.
With that said, "ADR will remain the driver for moderating" revenue per available room gains, according to PwC.
Full-year ADR in 2023 now is expected to be $155.92, up 4.5 percent year over year. The revised outlook represents an increase in PwC's previous projection of a 4.1 percent increase to $155.21. PwC now projects full-year 2023 RevPAR to be $98.25, up 5.2 percent year over year, but slightly below the company's previous forecast of $98.42.
Full-year 2023 rate increases are projected to be more moderate when compared with the double-digit-percentage rate hikes reported in 2021 and 2022, according to the report.
Some challenges to the outlook for U.S. hotels include increasing geopolitical tensions and macroeconomic risks, according to PwC.
"A liquidity crunch, labor market concerns, tight monetary policy, and the war in Israel are resulting in a worsening short-term outlook for the U.S. economy," according to PwC.
Looking ahead to 2024, "the outlook for midweek travel remains unclear with some companies indicating changes to their business travel policies in efforts to tighten corporate budgets, as well as achieve sustainability goals," according to PwC.
PwC expects full-year U.S. hotel occupancy to reach 63.2 percent, up 0.3 percentage points year over year. With occupancy levels "expected to be relatively flat in 2024," most performance gains will be derived from ADR, according to the report.
ADR in 2024 is expected to be $159.64, up 2.4 percent year over year. RevPAR in 2024 is expected to be $100.93, up 2.7 percent year over year and up nearly "117 percent of pre-pandemic levels," according to PwC.
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