RevPAR is projected to recover in 2024 as inbound international travel continues to improve and sector-specific headwinds moderate, CBRE said in its recent study.
According to CBRE’s predictions, RevPAR will grow 3% next year, fueled by a 40 bps improvement in occupancy and a 2.3% increase in ADR. RevPAR in 2024 will climb 14% from 2019 levels.
CBRE’s baseline forecast estimates average GDP growth of 0.8% and 2.9% average inflation in 2024. Considering the strong correlation between GDP and RevPAR growth, stronger or weaker economic growth is expected to have a direct impact on the performance of the lodging industry.
“U.S. hotel operators faced stiff headwinds to demand and pricing power over the summer due to the number of Americans who elected to vacation overseas, go on cruises or stay in short-term rentals or other alternative forms of lodging,” said Rachel Rothman, CBRE’s head of hotel research & data analytics.
As we head into the new year, RevPAR trends are expected to see a modest improvement, as headwinds will ease and the volume of inbound international travelers will see further recovery, Rothman added.
In the third quarter, demand slipped for the second consecutive quarter as ADR growth was the slowest since post-pandemic recovery began in H1 2021. Demand was weaker than anticipated, and additionally, modest pricing power resulted in RevPAR dipping by 0.3% across the U.S., the first quarterly decline in the post-COVID recovery cycle.
It is unlikely for U.S. hotel performance to decline at a time when economic growth has been resilient and consumer spending is touching new highs, CBRE said.
“However, we are optimistic that the eventual return of more than 4.7 inbound international travelers will boost occupancy and pricing power back toward their historical trend lines,” said Michael Nhu, senior economist and CBRE’s head of global hotels forecasting.
In the third quarter of 2023, urban was the best-performing lodging location type, where occupancy increased 110 bps to 70.3%, according to CBRE. Airport occupancy remained stable at 71.9%, while occupancy at suburban, town, resort and interstate properties saw a decline.
Across all location types, occupancies were below 2019 levels in Q3 2023.