STR and Tourism Economics Raise 2018 and 2019 Forecast for US Hotel Industry

Hotel No Vacany sign - Photo by KEEM IBARRA on Unsplash
STR and Tourism Economics Raise 2018 and 2019 Forecast for US Hotel Industry

STR projects full-year 2018 U.S. RevPAR growth of 3.2% and full-year 2019 U.S. RevPAR growth of 2.6%.

The U.S. hotel industry is projected to exceed earlier forecasts and continue on its record-breaking performance run through 2019, according to STR and Tourism Economics’ revised forecast released at the 10th Annual Hotel Data Conference.

“Rarely do we lift our ADR projections during our mid-year revisions, but stronger-than-expected pricing power over the last quarter has led us to lift our rate forecast by 10 basis points,” said Amanda Hite, STR’s president and CEO. “Certainly, inflation plays a role in ADR growth—inflation-adjusted figures show that ADR has basically been flat—but solid economic conditions and an earlier stronger impact from the recent tax cuts are helping to push growth further in the metrics.

“Aside from GDP growth and low unemployment, we’re starting to see a positive uptick in wages. We’ll need to see more in that area to count this as another driver of demand, but these are all good signs for the continued health of the industry through at least 2019.”

  2018 Forecast 2019 Forecast
Supply +2.0% +1.9%
Demand +2.6% +2.1%
Occupancy +0.6% +0.2%
ADR +2.6% +2.4%
RevPAR +3.2% +2.6%
Source: STR/Tourism Economics

For the total year, the U.S. hotel industry is projected to report a 0.6% increase in occupancy to 66.3%, a 2.6% rise in average daily rate (ADR) to US$129.85 and a 3.2% lift in revenue per available room (RevPAR) to US$86.09. RevPAR has grown at least 3.0% for each year since 2010.

The Luxury chain scale segment is likely to report the largest increases in occupancy (+0.9%), ADR (+3.0%) and RevPAR (+3.9%). While all segments should report RevPAR increases for 2018, the lowest rate of RevPAR growth is projected in the Upscale segment (+2.0%).

Twenty-two of the Top 25 Markets are projected to report RevPAR growth for the year. While most markets are projected in the 0% to +5.0% range, Minneapolis/St. Paul, Minnesota-Wisconsin, and Miami/Hialeah, Florida, are expected to see growth in the range of +5% and +10%. The three markets expected to show a decrease in RevPAR, all between 0% and -5%, are Houston, Texas; St. Louis, Missouri-Illinois; and Washington, D.C.-Maryland-Virginia.

For 2019, STR and Tourism Economics project the U.S. hotel industry to report a 0.2% increase in occupancy to 66.4%, a 2.4% lift in ADR to US$132.97 and a 2.6% rise in RevPAR to US$88.29.

The highest overall rate of RevPAR growth is expected in the Independent segment (+2.5%), while the lowest is projected among Midscale (+2.1%), Upper Midscale (+2.1%) and Upscale (+2.1%) chains.

Different from 2018, Minneapolis is the lone Top 25 Market projected to report a negative RevPAR percent change for the year. The remaining 24 markets are expected to post growth between 0% and 5%.

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