Officials from STR and CBRE agree the near-term prospects for the hotel industry remain good, with growth expected in both 2018 and 2019, but the picture gets much murkier in 2020 and beyond.
NASHVILLE, Tennessee—Things are going well for the hotel industry, but the good times won’t last forever, according to a panel of officials with STR and CBRE.
Speaking during the “Looking ahead: The industry forecast” panel at the 10th annual Hotel Data Conference, STR President and CEO Amanda Hite described the performance of hotel industry revenue per available room as strong for the remainder of 2018 but “slowing in 2019.” The consistently favorable demand picture for the industry is fueling that near-term optimism, with both wage growth and growth in international travel as positive signs at the same time that supply growth seems to be moderating. (STR is Hotel News Now’s parent company.)
“The fundamentals are there, and demand continues to increase,” she said.
STR’s updated forecast for U.S. hotel performance calls for 3.2% RevPAR growth for full-year 2018, with 2.6% average-daily-rate growth and 0.6% occupancy growth. The 2019 forecast calls for 2.6% RevPAR growth, primarily driven by ADR (+2.4%) rather than occupancy (+0.2%).
But Hite said the threats to the industry’s prolonged good times are becoming clearer.
“When you look out another year or 24 months, the economy is starting to slow down,” Hite said. “I don’t think supply is going to be an issue, but the economy is not as favorable.”
Mark Woodworth, senior managing director for CBRE Hotels’ Americas Research, agreed, noting economic modeling projects 0% gross-domestic-product growth in the first quarter of 2020. He said that’s something hoteliers should take note of sooner rather than later.
2020 “seems a long way away, but if you think about it, it’s less than a year and a half,” he said.
Woodworth said that more long-term outlook has shifted greatly just recently.
“The uncertainty present now didn’t exist just a quarter or two ago, and now it’s very visible,” he said.
He pointed to the potential for a full-blown international trade war as a factor that’s hard to gauge the total possible impact.
“Depending on the economist you talk to, the severity (of a trade war) is either shaving a tenth of a point off GDP or a global recession,” Woodworth said. “Pick your answer somewhere in that very broad range.”
Hite said there’s also potential for economic cooling due to the impact of U.S. corporate tax cuts being front-loaded.
“There are more macroeconomic concerns we’re starting to see and more that we have to watch out for,” she said, noting a dip in performance still isn’t likely in the back half of 2018 or the first half of 2019.
Lara Latture, president of management company Northwest x Southern Hospitality, said that while these macro projections for the industry across the U.S. might get a bit scary in 2020 and beyond, it’s important for hoteliers to keep their local market conditions in mind both in the short term and the long term. She also said it’s hard to not be pleased with the recent history of the hotel industry.
“All in all, we’ve been really happy the last two years,” she said.
While both Woodworth and Hite noted the supply picture is moderating, partly due to cost- and labor-related issues, Latture stressed that’s something that varies greatly among markets, pointing out markets like Seattle and Nashville, which are seeing outsized supply growth.
“Frankly, a lot of things have started opening, and that’s been the hovering dark cloud,” she said. “We’re immediately starting to see the impact.”