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U.S. hotel forecast for 2024-25 is significantly lowered as STR and Tourism Economics adjust projections due to weaker-than-expected 2024 performance.
The latest forecast reveals that rising living costs are constraining travel opportunities for lower-to-middle-income households, while hotels are grappling with increased operating expenses that are cutting into profit margins.
Key Insights:
STR and Tourism Economics have made “notable downward revisions” to their U.S. hotel forecast for 2024-25, reflecting lower-than-expected hotel performance in 2024. This announcement was made at the NYU International Hospitality Industry Investment Conference in New York City.
The revised forecast indicates a 1 percentage point reduction in projected Average Daily Rate (ADR) gains and a 2.1 percentage point drop in Revenue Per Available Room (RevPAR) growth. Additionally, occupancy rates are now expected to decline year over year.
Detailed Analysis:
Previous forecasts by STR and Tourism Economics had predicted an increase in occupancy rates for 2024. However, the latest update reveals that while the 2025 occupancy growth projection remains unchanged, ADR and RevPAR growth expectations for 2025 have been adjusted downward by 0.8 and 0.9 percentage points, respectively.
According to the revised forecast, U.S. RevPAR is now expected to grow by 2% in 2024 and 2.6% in 2025, a significant decrease from the earlier predictions of 4.1% growth in 2024 and 3.5% in 2025. Meanwhile, ADR is projected to increase by 2.1% this year and 2% next year, down from the previously anticipated growth rates of 3.1% in 2024 and 2.8% in 2025.
Revised U.S. Hotel Performance Outlook:
Tourism Economics’ Director of Industry Studies, Aran Ryan, noted that elevated interest rates and slowing wage growth have significantly impacted the spending power of middle- and lower-income consumers.
In a related development, Caesars Entertainment recently highlighted that wage increases secured by unions have led to higher operating costs, which contributed to a challenging first quarter. Additionally, the American Hotel & Lodging Association forecasts that hotels will pay out $123 billion in wages, salaries, and other compensation in 2024, a 4% increase from the previous year.
CBRE also projected a 3% growth in U.S. hotel RevPAR for the remainder of 2024.
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