Industry data analysts from STR, PwC and CBRE share their predictions for first-quarter hotel performance in the U.S. to shed some light on where the industry might go in the New Year.
REPORT FROM THE U.S.—The U.S. hotel industry experienced another strong year, pushing back against worries of the end of the cycle. While the industry did see revenue-per-available-room growth dip for a month because of a tough year-over-year comparison in September, it returned back to its normal growth trend the next month.
To see where the hotel industry is headed in 2019, Hotel News Now reached out to STR, PwC and CBRE for their first-quarter 2019 forecasts. Along with their forecasts, their analysts provided their guidance to put their forecasts into context. STR is the parent company of HNN.
Jan Freitag, SVP lodging insights, STR
“STR expects (first-quarter) RevPAR growth to increase 2.5% over Q1 of 2018. This represents a slowing of growth compared to last year when Q1 RevPAR grew +2.6%. The components of RevPAR growth remain the same as before, we expect very little—if any—increase in occupancy (0.1%) and so the bulk of growth will need to be contributed by (average daily rate) (2.4%). The lack of occupancy is not surprising given that the U.S. is running already the highest occupancies we have ever recorded. But this fact makes the tepidness of the ADR increase all the more puzzling.
“We expect the Minneapolis market to have a measurable downward impact on the Q1 results. Last year in February the Super Bowl performance lifted the U.S. results by 40 basis points.
“It stands to reason that it will be impossible to replicate the performance figures in Minneapolis in February and even the shift of some demand to Atlanta for the Super Bowl will provide some but likely not enough positive uplift.
“The ADR forecast for Q1 is pretty much in line with our year-end 2019 estimate of 2.3%, as we expect global uncertainty and economic slowing of growth will continue to weigh on hotel operators going forward. The hope is that the continued strong group demand will provide a healthy occupancy base that then allows hoteliers to yield up transient rooms and increase revenues at a pace above the level of expense growth.”
Warren Marr, U.S. hospitality & leisure managing director, PwC
“One of the key factors that affects Q1 RevPAR is the timing of two big travel holidays. Last year, Passover and Holy Week (ending on Easter Sunday) straddled the very end of March and beginning of April. In 2019, they are both squarely in the middle of April, which should bode well for the first quarter.
“Growth in Q1 RevPAR will likely come entirely from room rate. It’ll be higher than it was at the same time last year because of a resurgence in business travel during the latter part of 2018. Business travelers are not as sensitive to price as midweek leisure guests, so major markets could see higher pricing as we move into 2019.
"Stock market volatility increased significantly during the fourth quarter of 2018. It didn't take much in the way of news to move the needle in one direction or the other. The new Congress could also have a pronounced impact on lodging performance, depending on its positioning out of the gate. In addition, we continue to monitor trade tensions, waning fiscal stimulus, increasing interest rates and growing inflation.
“That said, economic indicators suggest continued growth for the lodging industry, given higher consumer spending supported by rising disposable income, employment and household net worth. Overall growth in the industry is expected to continue, but at a slightly slower pace than we've seen over the past several years.”
Mark Woodworth, senior managing director, CBRE Hotels’ Americas Research
“Although elevated levels of uncertainty characterize the economic (how many Fed interest rate hikes, are tariffs going up/down and/or away, how low will oil prices go?) and political (new leadership in the House, probes coming or going) landscape, our expectations for Q1 2019 remain positive. Supported by the most recent reading of the Index of Leading Economic Indicators from the Conference Board, we expect that Q1 2019 demand growth will outpace supply and our ADR forecast calls for a 2.5% gain, leading to an increase in RevPAR of 2.9%. Like we saw in 2017 and 2018, Q1 performance in 2019 will be greater than what we are currently forecasting for the full year, which is for a 2.7% gain in RevPAR.”
Correction, 2 January 2019: The infographic has been updated to correct the number of rooms added and sold in STR’s forecast.