by Michael J. Shapiro | November 28, 2017
The U.S. hotel industry is expected to experience record occupancy levels through 2019, according to the December 2017 edition of Hotel Horizons from CBRE Hotels' Americas Research. If that comes to pass, that will mark a full decade of uninterrupted occupancy growth - something that hasn't occurred in the past 86 years, according to CBRE. The latest forecast, released today, calls for U.S. hotel occupancy to hit 65.9 percent for the full year of 2017 and to remain around that level through the end of the decade.
"Given the encouraging signs concerning the domestic economy, continued increases in lodging demand and the measured growth in supply, occupancy levels are expected to remain at their peak in the years ahead," said R. Mark Woodworth, senior managing director of CBRE Hotels' Americas Research. "CBRE Research expectations for U.S. gross domestic product, employment and income growth for the next two years should support lodging demand growth of 2 percent or more per year, which slightly exceeds our expectations for the net increase in supply over this period. If we continue to see upgraded expectations for the economy, demand growth may exceed these expectations, and all industry participants will benefit as a result."
According to the report, the industry has continued to exceed expectations - and continues to render premature the talk of an imminent downslide. "Using terminology from my colleagues in the physics department, the U.S. lodging industry reached its 'escape velocity' back in 2014," said John B. (Jack) Corgel, Ph.D., professor of real estate at the Cornell University School of Hotel Administration and senior advisor to CBRE. "U.S. hotels returned to their previous peak occupancy levels that year and arguably have moved to an even higher orbit with the record occupancy expected for 2017. Our forecasts show that hotels will sustain a very high level of performance. Looking at all the economic and market factors that could influence hotel performance in the future, if the industry were to jettison itself from its current glide path, the trajectory would more likely be upward, not downward."
Planners should note, however, that CBRE expects the current lag in average-daily-rate growth to continue. The report forecasts ADR growth of 2.2 percent this year, followed by 2.5 percent in 2018. That's well below the long-run average annual ADR growth rate of 3.1 percent. The analysts believe the lag is due to a number of factors, including increased supply growth, low inflation, the effects of the sharing economy, revenue management and the best-price guarantees commonly offered by hoteliers.
CBRE researchers added that local economic and market factors are extremely important when looking forward. "We continue to see great diversity among the performance of the 60 markets in our Hotel Horizons universe," Woodworth said. "For 2018, approximately half of the markets are forecast to achieve real growth in RevPAR, but more than a half dozen will suffer actual declines in this important measure."
Lodging supply increases will be a major factor in determining performance. "Supply change continues to be a critical local market issue," Woodworth said. "Pipeline activity across the 60 markets we analyze is very polarized and is the major influencer of our forecasts for occupancy and ADR change."
The December Hotel Horizons report is available for purchase at