STR and Tourism Economics have issued their final U.S. hotel performance forecast for 2018 and 2019, and while the report shows a drop in the initial demand previously predicted, it also says that hotels will continue to enjoy record breaking performances as they wrap up 2018 and in 2019.
"Our last forecast update in August had RevPAR growth at 3.2 percent and 2.6 percent for 2018 and 2019, respectively," said Amanda Hite, STR's president and CEO. "We knew the third quarter of this year would be tough because of comparisons with the post-hurricane demand period of 2017, but demand still came in lower than expected. Regardless, industry performance is still growing. There are issues such as rising labor costs, but the macroeconomic environment remains favorable overall, and the industry's record-breaking run should continue through at least 2019 even with softening in overall growth."
For 2018 compared to 2017, the U.S. hotel industry is projected to report a 0.4 precent increase in occupancy for an industry average of 66.2 percent. A 2.6 percent increase in average daily rate will bring ADR to $129.99, and a 3.0 percent lift in revenue per available room, saw RevPar increase to $86.00. Of note, RevPAR has grown at least 3.0 percent for each year since 2010, and according to STR this trend shows no sign of slowing going into 2019.
Occupancy levels increased across all sectors, from luxury to economy, with luxury expected to post the highest growth rates in ADR and RevPar. ADR is forecasted to increase 3.5 percent, and RevPar 4.2 percent. In addition, while all segments should report RevPAR increases for 2018, the lowest rate of RevPAR growth is projected in the Upper Midscale segment, which is projected to see just a 1.7 percent increase.
Twenty-three of the top 25 markets are projected to report RevPAR growth for the year, but while most markets are projected to see a moderate increase in the 5 percent range, five markets -- Chicago, Miami, Minneapolis, Philadelphia and San Francisco -- are expected to see higher RevPar increases within the 5 to 10 percent range. Two markets, Houston and Washington, D.C., will show a decrease in RevPAR, of up to minus 5 percent.
Looking ahead to 2019, compared to 2018, STR and Tourism Economics project the U.S. hotel industry to report a 0.1 percent increase in average occupancy to 66.2 percent; a 2.3 lift in average ADR to $133.04, and a 2.4 percent rise in average RevPAR to $88.07.
Luxury, midscale and independent segments are forecasted to see the highest overall RevPar growth, a 2.3 percent increase over 2018. While upscale and upper midscale segments are projected to see the lowest gains of just a 1.9 percent increase.
Looking at the top 25 markets, Minneapolis is the one projected to report a negative RevPAR percent change in 2019 vs. 2018, due largely to the difficult-to-match comparison with the Super Bowl, which it hosted in 2018. The remaining 24 markets are expected to post growth between with the 5 percent range.