by Michael J. Shapiro | August 16, 2018
The U.S. hotel industry's record-breaking performance isn't expected to end anytime soon. In fact, the latest forecast from STR and Tourism Economics foresees an even rosier outlook than previously predicted.
 
The revised forecast, just released at the 10th Annual Hotel Data Conference in Nashville, projects stronger rate increases than expected for the next two years. "Rarely do we lift our ADR projections during our midyear revisions," said Amanda Hite, STR president and CEO, "but stronger-than-expected pricing power over the last quarter has led us to lift our rate forecast by 10 basis points. Certainly, inflation plays a role in ADR growth - inflation-adjusted figures show that ADR has basically been flat - but solid economic conditions and an earlier, stronger impact from the recent tax cuts are helping to push growth further in the metrics."
 
That equates to predicted average daily rate jumps of 2.6 percent for 2018 and another 2.4 percent for 2019, according to the new forecast. Demand for 2018 is expected to outstrip the supply increase yet again, by 2.6 percent compared with 2 percent. Occupancy is projected to inch up by just 0.6 percent for the year, but the strong ADR increase will drive a forecasted 3.2 percent rise in revenue per available room.
 
For 2019, demand is forecast to increase by a more modest 2.1 percent, but continue to exceed supply growth at 1.9 percent. Occupancy could be nearly flat, up by just 0.2 percent, with that 2.4 percent jump in ADR pushing RevPAR up by 2.6 percent.
 
Hite pointed to GDP growth, low unemployment and a recent rise in wages as positive drivers. "We'll need to see more in that area to count this as another driver of demand," she said, "but these are all good signs for the continued health of the industry through at least 2019."
 
Twenty-two out of the Top 25 Markets are expected to report RevPAR growth for 2018, with two of those markets - Minneapolis/St.Paul and Miami/Hialeah - projected to enjoy growth exceeding 5 percent. Decreases in RevPAR are predicted for Houston, St. Louis, and Washington, D.C. In 2019, the only major market expected to show a RevPAR decrease is Minneapolis/St. Paul.
 
The luxury segment is expected to lead in RevPAR growth (3.9 percent) in 2018, while the independent segment could lead the pack in 2019, with a 2.5 percent RevPAR increase.
 
Revenue per available room has grown by at least 3 percent per year since 2010. That's one streak that could end in 2019, if the current forecast holds true.