CBRE has raised its hotel performance forecast for 2023, following industry gains in Q4 2022 and the expectation of marginally positive GDP growth this year.
CBRE has revised its forecast for RevPAR to $97.46, up 5.8% YOY and an increase of $0.43 from its earlier forecast. The revision is predicated on around 30 basis points increase in expected occupancy as against the November 2022 forecast.
The ADR forecast of $150.21 remained unchanged.
CBRE’s baseline-scenario forecasts predicted a rise of 0.2% for full-year 2023 GDP growth and inflation of 4.7%. Considering the robust correlation between GDP and RevPAR growth, CBRE expected the revised economic outlook to impact the lodging industry results directly.
The U.S. economy grew at an annualized rate of 2.9% in Q4 2022. This was the second consecutive quarter of positive GDP growth. The positive economic growth led to a Q4 record U.S. RevPAR of $89.27, rising by 16.2% YOY from Q4 2021, CBRE said in a release.
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The growth in RevPAR was boosted by a 12.1% rise in ADR and a 3.6% rise in occupancy YOY. The quarter’s performance can be attributed to sustained improvement in group business, inbound international travel and a rise in traditional transient business demand.
“The easing of travel restrictions in Japan and China, combined with continued improvements in group and independent business travel, should drive RevPAR to record levels in 2023 under our base-case scenario,” said Rachael Rothman, CBRE’s head of hotel research & data analytics.
Most of the RevPAR growth this year is expected to occur early in the year, especially in the first quarter. The new RevPAR forecast will see 16.2% growth in Q1 2023, followed by increases in the 1.5% to 4.5% range over the rest of the year.
Hotel supply is projected to rise at a 1% compound annual growth rate in the next five years, below the industry’s 1.7% long-term historical average, CBRE said.
Inflation continues to leave a mixed impact on the hotel industry, boosting top-line growth while pressuring margins and increasing the cost of renovations and development, CBRE said.
“The combination of inflationary pressures and higher interest rates are leading to slower hotel supply growth and further strengthening the pricing power of existing hotels,” said Michael Nhu, CBRE’s global hotels economist.