The 2017 outlook for U.S. hotels offers mixed blessings, with near record occupancy levels projected while average daily room rates (ADR) are expected to continue leveling off.
According to the recently released December 2016 Hotel Horizons® forecast report, CBRE Hotels’ Americas Research is projecting that the U.S. lodging industry will achieve an annual occupancy rate of 65.3 percent in 2017, just shy of the 65.4 percent all-time record occupancy level expected for 2016.
“Conventional wisdom says that at such high occupancy levels, hoteliers should have the leverage to implement strong price increases. However, like for much of 2016, you need to throw conventional wisdom out the window,” said R. Mark Woodworth, senior managing director of CBRE Hotels’ Americas Research.
Despite the lofty occupancy levels, CBRE is forecasting a national ADR increase of 3.3 percent in 2017. While this represents a real ADR change of 1.7 percent, the pace of ADR growth has been falling since 2014 and is expected to continue to weaken through 2019.
“Of course, movements in ADR do vary by location and chain-scale. The northern California markets of Sacramento and Oakland, along with Washington, D.C. and Tampa, are projected to lead the nation and enjoy ADR gains in excess of six percent during 2017. Further, lower-priced independent properties, which have lagged in their recovery, are starting to see some meaningful increases in room rate,” Woodworth added.
CBRE attributes the overall sluggishness in ADR growth to a combination of factors, some of which are new to the U.S. lodging industry:
- In an effort to draw business from third-party intermediaries, the major brands are aggressively promoting consumers to book direct on the chain’s website with guaranteed “best available rates”
- Increased competition from the sharing economy
- Weekend leisure travelers now comprise a larger portion of total lodging demand – these guests tend to be more price-sensitive