Excerpt from CoStar
The hotel industry has enjoyed demand recovery even as rate growth slows to reach a more normalized pace.
During the numbers panel at the Americas Lodging Investment Summit, hotel industry data experts shared their takes on what lies in store for U.S. hoteliers.
The U.S. hotel industry finished 2023 with record highs in average daily rate and revenue per available room, said Amanda Hite, president of STR, CoStar’s hospitality analytics firm. The overall economy held up better than anticipated, but there will be some economic slowdown in the U.S. this year.
Even so, there are several reasons to believe the travel economy will fare much better than the general economy, she said. One is the growing employment level of college-educated professionals. Another is that the number of households earning $100,000 or more, a group of people who prioritize travel spend, is expected to grow 3% in 2024 and 2025.
Corporate profits are a good indicator of spending on business travel, Hite said. Oxford Economics projects corporate profits will grow 10% this year and next.
CoStar’s latest U.S. hotel industry forecast keeps RevPAR growth at 4.1%, which is flat compared to its most recent update, Hite said. The projection for room demand in 2024 increased slightly. The growth rate on room supply for next year should be 0.9%, and it won’t be back to the industry’s long-term growth average until after 2026.
“The good news is average-daily-rate growth is expected to pace above inflation for the foreseeable future,” she said.
For 2025, the forecast drops ADR growth from 3.1% to 2.8%, but that’s due to normalization of the long-term average for the key performance indicators in each metric, she said. In other words, it’s not a significant change in terms of the outlook for demand.
Among the hotel chain scales, there are no significant changes, but the expectation is that the majority of RevPAR growth will occur in the upper-tier segments, from upscale to luxury, Hite said. That will be due more to ADR growth than occupancy growth, but both metrics will see gains. RevPAR growth in the luxury segment will slow in 2025, but for all the other segments, RevPAR growth in 2025 will look like 2024.
Most of U.S. hotel RevPAR growth has come via direct channels, particularly brand.com, which is a good sign for the industry, Kalibri Labs co-founder and CEO Cindy Estis Green said. The business coming in through global distribution systems has tended to be lower because many Fortune 500 companies haven’t had as many employees traveling again despite higher corporate profits.
Smaller and medium-sized corporate events have consistently grown, and they’re running about 120% to 130% of 2019 levels, she said. Group business will be close to 2019 levels in 2024.
Looking at other distribution channels, voice has dropped off, as has property direct, losing ground to brand.com or online travel agencies, Estis Green said.
“Surprisingly, the OTA business has not been a runaway train in any way, which a lot of people were concerned about,” she said.
OTA business relative to brand.com hasn’t been growing equally, Estis Green said. Much of that is due to loyalty programs given that loyalty contribution is at an all-time high. Fifty-three percent of overall industry room nights have been driven by loyalty members.
Click here to read complete article at CoStar.