According to the February 2024 edition of Hotel Horizons, the 65 major U.S. markets tracked by CBRE are forecast to achieve a revenue per available room gain of 3.7 percent in 2024. As a subset of the 65 markets, the 25 largest will enjoy an even greater RevPAR increase of 4.1 percent. Both growth rates are greater than the 3.0 percent gain projected for all U.S. hotels during the year.
Most major markets are dependent on corporate and group demand, as well as inbound international travelers. With these demand segments lagging in recovery, the major markets have only recently entered the RevPAR growth phase of the recovery cycle over the past two years. By year-end 2024, CBRE projects the RevPAR for all U.S. hotels will be 117 percent of the 2019 RevPAR. This is greater than the 114 percent RevPAR pace of recovery for all 65 Horizons markets.
Within the major markets, the relative pace of demand segment recovery has also influenced the performance of the different lodging categories. In 2024, upper-priced (luxury, upper-upscale) hotels are expected to see RevPAR grow by 4.4 percent, which is greater than the 3.0 percent RevPAR growth rates forecast for mid-priced (upper-midscale, upscale) and lower-priced (midscale, economy) segments.
Upper-priced hotels are benefiting from relatively strong year-over-year gains in demand (3.3 percent), along with a supply increase of just 1.2 percent. Despite this leverage, upper-priced major market hotels are not forecast to achieve any average daily rate growth premiums in 2024. For 2024, upper-priced major market hotels should see their ADR increase by 2.3 percent, the same growth that is expected for both mid-priced and lower-priced properties.
Developer interest is greatest in the mid-priced segment, and lowest in the lower-priced segment. Hotels operating in the upscale and upper-midscale categories will see their competition increase by 1.6 percent in 2024, while lower-priced supply will rise by just 0.4 percent during the year.
The following section highlights the performance of select major markets around the U.S. in 2024.
California
There is a noticeable difference in the performance of the lodging markets in southern California compared to northern California. Indicative of stronger local economies and diverse demand sources, the San Diego (77.6 percent) and Los Angeles (76.2 percent) markets will achieve some of the highest occupancy levels in the nation during 2024. On the other hand, San Francisco and San Jose hotels will enjoy the greatest gains in RevPAR, but still lag behind their 2019 RevPAR level at year-end.
During the early stages of the recovery, hotels in the Coachella Valley experienced relatively strong growth in demand, ADR, and RevPAR, and was one of the first markets to return to pre-COVID levels. Given their advanced placement in the recovery cycle, Coachella Valley hotels are expected to suffer the greatest decline in occupancy (-0.9 percent) in the nation.
Texas
Relatively low operating and development costs, combined with less restrictive zoning regulations, have historically attracted hotel developers to Texas. This continues to be the case in 2024, as the markets of Fort Worth (5.3 percent) and Austin (3.0 percent) lead the nation in supply growth during the year.
Coastal
During the depths of the pandemic, major gateway markets along the U.S. east and west coasts lagged in performance and recovery. Therefore, it is expected that markets such as New York City, Hawaii, San Diego, Miami and Los Angeles will achieve the highest occupancy levels among all U.S. markets in 2024. Each of these markets benefit from the continued rise in inbound international travelers, along with strong port operations.
Midwest
While hotels along the coasts will experience high occupancy levels in 2024, those located in the Midwest will struggle. Hotels located in Milwaukee, Minneapolis, St. Louis, Pittsburgh and Louisville are forecast to achieve the lowest occupancy levels in the U.S., as these markets are more dependent on the return of corporate demand and have not benefited from the relative strength of leisure demand.
CBRE has always advised its clients to pay attention to local economic and lodging conditions, especially within 65 Hotel Horizons cities. Within these major markets, we continue to see significant variations in lodging performance as cities look to diversify their economies and hotel demand patterns change. In turn, this is what causes the difference in lodging performance based on geography, chain-scale, property types, and market orientation.
Robert Mandelbaum is director of research information services for CBRE Hotels. To learn more about the Hotel Horizons forecast reports for 65 markets in the United States, visit pip.cbrehotels.com, or call 855-223-1200.