by Michael J. Shapiro | November 17, 2017
The U.S. hotel industry is on track to exceed expectations for 2017, according to the latest forecast from STR and Tourism Economics. Demand has significantly exceeded earlier projections, and is now projected to rise by 2.4 percent year-over-year. That would lead to a slight uptick in occupancy, which is now forecasted to increase by 0.5 percent, to 65.7 percent for the year.
 
"At the same time," added Jan Freitag, STR's senior vice president of lodging insights, "average daily rate growth has been more muted than expected given the record occupancy level. The third quarter was difficult to parse because of the disruptions from Hurricane Harvey and Hurricane Irma, but we know that demand was lifted in a number of major markets as a result. Looking past the shifts in the data, we think hotel performance should remain steady - very much like current economic conditions."  
 
The latest forecasts calls for a lower-than-previously-expected ADR increase of 2.1 percent this year, to $126.66, along with a 2.5 percent rise in revenue per available room, to $83.23. That RevPAR growth is a bit of a letdown, following seven straight years of annual increases in excess of 3 percent.
 
The weakest RevPAR rise is expected from the upscale segment, at 1.1 percent, while independent hotels are forecasted to enjoy both the highest RevPAR increase (3.7 percent) and ADR jump (2.8 percent). Both independent and midscale hotels are predicted to achieve the highest occupancy growth, at 0.9 percent.
 
Four of STR's top 25 markets are projected to see RevPAR increases between 5 and 10 percent: Detroit, Houston, Orlando and Seattle. Seventeen of the top 25 should see flat RevPAR growth for 2017.
 
For 2018, the prognosticators foresee an occupancy drop of 0.2 percent, along with a 2.4 percent hike in ADR and 2.2 percent RevPAR increase.
 
"We built this forecast under the assumption that there will be tax legislation and a subsequent improvement in GDP growth next year," Freitag said. "Better ADR growth than 2017 would then better offset an expected decline in occupancy. Regardless, we expect more moderate performance growth overall."
 
The forecast calls for every segment to record occupancy drops next year, with the exception of independent-hotel occupancy, which is predicted to remain flat. The independent segment is expected to see the highest RevPAR gain in 2018 as well, with a 2.3 percent increase. An industrywide RevPAR rise of 2.2 percent is expected. 
 
Three of the top 25 markets are predicted to see a RevPAR change of between 0 and -5 percent in 2018: Houston, Miami/Hialeah and New York. Every other top 25 market is forecast to see a RevPAR change from 0 to 5 percent.