Supply growth concentrated in a handful of top markets

Given the record occupancy levels observed for the past four years, CBRE Hotels Research has focused on the factors that potentially could cause a downward inflection in the business cycle. Oversupply certainly has been one of those factors.

While our forecasts for national supply growth from 2019 through 2022 exceed the STR long-run average of 1.8 percent, the new hotel rooms are concentrated in just a few markets. Half of the estimated 105,000 net new rooms forecast to open in 2019 are in just 17 of the nation’s major markets. Over the next four years, this number ranges from 23 to 32. The remaining markets will realize limited increases in new competition and likely won’t experience a meaningful slowdown in performance.

The concentrated supply growth not only impacts occupancy, but average daily rate, as well. In the markets with the highest concentrations of new supply, ADR growth will remain below the pace of inflation each year from 2019 through 2022. Conversely, the markets with relatively limited supply growth will achieve ADR growth in excess of inflation each of the next four years. This amplifies the reality that lodging is a street-corner business and you must understand local economic and market conditions.

The following paragraphs highlight the high and lows of performance forecast for 2019 in the 60 Hotel Horizons markets.

Supply and Demand

Nashville and Denver continue to lead the nation with the greatest percentage increases in supply during 2019. The rise in the Nashville lodging supply is comprised of multiple properties that will lead to a 7.7 percent increase in the available room count. Conversely, the majority of the 6.4 percent increase in the Denver lodging supply is attributable to the opening of the 1,500-room Gaylord Rockies Resort and Convention Center in December 2018.

Both the Seattle and Fort Lauderdale, Fla., markets are forecast to see their hotel stocks increase 5.6 percent in 2019. New boutique and lifestyle properties will boost the lodging supply in Savannah, Ga., 5.1 percent.

The net lodging inventories in Albuquerque, N.M.; Oahu, Hawaii; Richmond, Va.; and Long Island, N.Y., will decline in 2019. Within these cities, some hotels will close permanently. Other properties are temporarily closed for renovations.

Fortunately for hoteliers in Nashville, the 7.7 percent increase in supply will be thoroughly absorbed by an 8 percent increase in demand. Growth in accommodated roomnights in Fort Lauderdale (5.5 percent) and Seattle (5.3 percent) will almost keep pace with the concurrent growth in supply in these cities. Other markets projected to enjoy healthy increases in demand during 2019 are Austin, Texas, (5.7 percent) and Louisville, Ky., (5.1 percent).

Occupancy and ADR

Strong increases in demand characterize the five cities projected to enjoy the greatest increases in occupancy in 2019. On average, Pittsburgh; Milwaukee; Raleigh-Durham, N.C.; Omaha, Neb.; and Sacramento, Calif., are forecast to achieve gains in demand of 4.1 percent.

For the fourth year in a row, 27 of the 60 Hotel Horizons markets are forecast to suffer declines in occupancy. Unlike previous years, however, the five markets forecast to experience the greatest declines in occupancy are not cities that will experience relatively strong growth in supply. In 2019, limited increase in demand is the primary reason why occupancy levels will decline in Newark, N.J.; Washington, D.C.; Philadelphia; San Jose-Santa Cruz, Calif.; and Salt Lake City.

Once again hotels in the San Francisco Bay area will lead the nation in ADR growth. Properties in San Francisco and Oakland will see their average room rates increase 8.5 percent and 7.8 percent, respectively, in 2019.

By hosting the Super Bowl in January 2019, Atlanta hotels will enjoy a strong 5.3 percent boost in ADR for the year. On the other hand, ADRs for properties in Minneapolis are forecast to decline 2.9 percent in 2019, the year after the city hosted the big game. Other cities forecast to experience declines in ADR during 2019 are New York (-1.5 percent), Houston (-0.5 percent) and Fort Lauderdale (-0.2 percent).

Robert Mandelbaum is director of research information services for CBRE Hotels’ Americas Research. He is located in the firm’s Atlanta office. To learn more about the Hotel Horizons forecast reports for 60 markets in the United States, visit