Sustained Occupancy, RevPAR Growth Projected Through 2018
U.S. hotel occupancy could reach 73.7 percent between now and 2018, according to online real-estate marketplace Auction.com, leading to an average revenue per available room increase of 4.7 percent through the end of that year. Rate growth should slow just a bit, but remain in the mid-3 percent range. The projections were published in Auction's Q2 2015 Hotel Monitor Report.
"Supply and demand in the hospitality sector is playing out the way we've anticipated, and we continue to expect increases in occupancy over the next several years, regardless of the step back seen during Q2 2015," said Peter Muoio, Ph.D., chief economist for Auction.com. Muoio added that the supply pipeline is moderate but increasing.
On a seasonally adjusted basis, room sales in the second quarter fell for the first time since mid-2012, the step back to which Muoio referred. But those sales were still 2.7 percent higher than last year's, and the Q2 room rates continued to rise -- by a seasonally adjusted 1.6 percent, pushing average daily rate up by 4.8 percent year-over-year. Room revenue was down by 2.2 percent from the first quarter, when adjusted seasonally, but still 2.7 percent higher year-over-year.
Given the robust hotel market conditions, the growth in room supply is still relatively moderate, with the U.S. room count increasing by just 1.1 percent in the second quarter. Consumer spending on hotels and business travel both are surging, with the latter expected to accelerate in 2016. Auction.com points to the West and Southeast as particularly strong hotel markets, and projects that the Midwest and Southwest should see more moderate gains. In terms of challenges, the report calls out New York City and Washington, D.C., where a lot of new rooms are beginning to open. That supply increase, coupled with the strong dollar and a possible reduction in foreign tourists, could put a strain on rate and revenue growth.