DALLAS, Texas—CBRE reduced its forecast for U.S. hotel performance this year as lodging demand softens due to weaker-than-expected leisure travel and slowing corporate profit growth.
CBRE now projects a 1.2 percent increase in revenue per available room (RevPAR) growth for 2024, down from the 2.0 percent estimated in May 2024. Nevertheless, CBRE anticipates 2 percent year-over-year growth in RevPAR in the second half of 2024, up from 0.5 percent year-over-year growth in the first half, driven by international tourism and election-related events.
CBRE forecasts GDP growth of 2.3 percent and average inflation of 3.2 percent in 2024. The performance of the lodging industry is closely tied to the strength of the economy, as there is typically a strong correlation between GDP and RevPAR growth.
“We expect low single-digit RevPAR growth over the near term as election-related events, growth in inbound international travel, and an anticipated lower interest rate environment should support hotel demand,” said Rachael Rothman, CBRE’s head of hotel research and data analytics. “Challenges including weakening consumer spending and increased competition from short-term rentals, cruise lines, and other lodging alternatives pose downside risks.”
CBRE remains optimistic that RevPAR will achieve a nominal record of $100.54 this year, representing 114.5 percent of pre-pandemic levels in 2019. This outlook is based on projected average daily rate (ADR) growth of 1.1 percent and a 10-basis point increase in occupancy.
“Following stronger-than-expected GDP growth in the second quarter, CBRE anticipates a slowdown in economic growth in the second half of 2024 and into 2025,” said Michael Nhu, senior economist and CBRE’s head of global hotels forecasting. “If interest rate cuts do not stimulate growth and the economy continues to weaken, we may see a decline in RevPAR.”
Despite these potential challenges, demand for travel remains strong with record year-to-date Transportation Security Administration (TSA) throughput in the United States of nearly 549 million passengers, up 5.4 percent year-over-year. CBRE expects increasing global wealth and muted supply growth to support lodging fundamentals over the longer term. CBRE forecasts compound annual growth in supply of under 1 percent over the next three years, as elevated financing and construction costs temper construction activity.
