STR and Tourism Economics Downgrade 2024-25 U.S. Hotel Forecast
STR and Tourism Economics made significant downward adjustments to the 2024-25 U.S. hotel forecast just released at the 46th Annual NYU International Hospitality Industry Investment Conference. The latest revision reflects lower-than-expected performance thus far in 2024 as well as lessened growth projections for the remainder of the year.
For 2024, projected gains in average daily rate (ADR) and revenue per available room (RevPAR) were downgraded 1.0 percentage points and 2.1 ppts, respectively. Occupancy for the year is now expected to decline after the previous forecast projected year-over-year growth in the metric. For 2025, an occupancy growth projection was kept in place, but downward adjustments were once again made to ADR (-0.8 ppts) and RevPAR (-0.9 ppts).
“We have seen a bifurcation in hotel performance over the first four months of the year, which we don’t believe will abate soon,” said Amanda Hite, STR president. “The increased cost of living is affecting lower-to-middle income households and their ability to travel, thus lessening demand for hotels in the lower price tier. The Upscale through Luxury tier is seeing healthy demand, but pricing power has waned given changes in mix and travel patterns and to a lesser extent, economic conditions. Travel remains a priority for most Americans, but the volume has lessened as prices on goods and services continue to rise.”
“Still-elevated interest rates and easing wage growth have contributed to cautious business investment and pinched spending by many middle- and lower-income consumers,” said Aran Ryan, director of industry studies at Tourism Economics, “Looking beyond this near-term pull-back in demand at lower-tier properties, we expect moderate travel growth to resume, supported by a tempered economic expansion and the continued rebound of group, business, and international travel.”
“Higher operating expenses have led us to forecast lower GOP margins,” said Hite. “Labor costs are projected to be nearly 33% of total revenues through the remainer of 2024 and will have the greatest impact on GOP margins. Upper Midscale chains are expected to maintain the lowest labor costs, and thus the most competitive GOP margins for most of 2024, which follows pre-pandemic trends.”
STR provides premium data benchmarking, analytics and marketplace insights for the global hospitality industry. Founded in 1985, STR maintains a presence in 15 countries with a North American headquarters in Hendersonville, Tennessee, an international headquarters in London, and an Asia Pacific headquarters in Singapore. STR was acquired in October 2019 by CoStar Group, Inc. (NASDAQ: CSGP), a leading provider of online real estate marketplaces, information and analytics in the commercial and residential property markets. For more information, please visit str.com and costargroup.com.
Categories: Trends