STR, Tourism Economics downgrade U.S. RevPAR forecast

STR and Tourism Economics downgraded their forecast for U.S. revenue per available room growth to 1.6 percent in 2019 and 1.1 percent in 2020. With occupancy high but flat, the groups reported average daily rate has been the sole driver of RevPAR.

This past June, STR and Tourism Economics predicted RevPAR would hit 2 percent this year and 1.9 percent in 2020. The groups’ June forecast for 2019 RevPAR was itself a downgrade from January, when they predicted RevPAR would rise 2.3 percent. For comparison, the 2.9 percent RevPAR increases recorded in both 2018 and 2017 stood as the lowest changes in RevPAR since the recession.

“We continue to see ADR rise below the level of inflation even as the industry operates in the highest demand and occupancy environment in history,” Amanda Hite, STR’s president/CEO, said in a statement. “The absence of hotelier pricing confidence has even extended into the peak summer months, leading us to downgrade our ADR projections by 50 basis points for 2019 and 80 basis points for 2020. Those projected decreases correlate with a downgraded [gross domestic product] forecast and lead to an obvious reduction in our RevPAR projection.

Though the industry has managed with recent supply growth from a national perspective, Hite said “there are plenty of major markets and several segments—select-service mostly—that have seen the negative effects of new inventory even with consistent demand.”

2019 Forecast

This year, STR and Tourism Economics project the U.S. hotel industry will experience a 0.1 percent increase in occupancy to 66.3 percent, a 1.4 percent rise in ADR to $131.83 and a 1.6 percent lift in RevPAR to $87.41.

The groups project four of the top 25 markets will achieve RevPAR growth of 3 percent or higher in 2019: Atlanta; Tampa/St. Petersburg, Fla.; San Francisco/San Mateo, Calif.; and Nashville.

They also predict six of the top 25 markets will register decreases in RevPAR this year: Houston, New York, Seattle, Minneapolis/St. Paul, Miami/Hialeah and Washington, D.C.-Maryland-Virginia.

By segment, STR and Tourism Economics predict the economy scale will report the largest increase in occupancy (1 percent); luxury chains will see the largest growth in ADR (2.4 percent); independent hotels will experience the highest jump in RevPAR (2.4 percent); and the upscale segment will see the lowest rate of RevPAR growth (0.3 percent).

2020 Forecast

STR and Tourism Economics project occupancy will fall 0.3 percent next year to 66.1 percent, ADR will rise 1.4 percent to $133.70 and RevPAR will increase 1.1 percent to $88.40. The groups noted occupancy has not declined year-over-year since 2009.

Of the top 25 markets, they project two—Miami and San Francisco— will experience RevPAR growth of 3 percent or more and only one—New York—will see RevPAR decline. It also projects luxury hotels will register the highest rate of RevPAR growth at 1.8 percent and upscale chains will see the lowest rate at 0.4 percent.