hotel markets in balance

The magnitude of change in the major industry indicators is not pleasing U.S. hotel owners and operators. New development activity continues to accelerate, while growth in average daily room rates (ADR) has decelerated.

The sluggish start during the first half of the year resulted in another downgrade by CBRE Hotels’ Americas Research of its forecast for the entirety of 2016.

“It has been very interesting dissecting the performance of the U.S. lodging industry during the first half of 2016,” said R. Mark Woodworth, senior managing director of CBRE Hotels’ Americas Research.  “On the one hand, we are comforted by the continual growth in accommodated demand.

After all, if people stop traveling, nothing else really matters.  On the other hand, there continues to be a disconnect between the record occupancy levels and the inability of hoteliers to increase room rates.”

According to STR, U.S. lodging demand increased by 1.6 percent during the first half of 2016 compared to the first half of 2015.  At the same time, hotel rooms supply rose by just 1.5 percent, resulting in a 0.1 percent boost to occupancy.

With demand and occupancy on the rise, ADRs did increase by 3.1 percent, but this is less than the 4.1 percent pace seen during the first half of 2015 and the annual 2015 growth rate of 4.4 percent.

Based on the first half performance data, CBRE Hotels’ Americas Research adjusted its forecast for the year 2016.  According to the firm’s September 2016 Hotel Horizons® forecast that was released at the STR Hotel Data Conference, U.S. hotels will enjoy a 0.1 percent increase in occupancy for the year, concurrent with a 3.5 percent rise in ADR.

This results in a RevPAR gain of 3.6 percent.  The occupancy forecast represents an improvement over the 0.1 percent decline presented in June 2016 edition of Hotel Horizons®, but the ADR and RevPAR forecast rates are 0.8 and 0.6 percentage points less, respectively.

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