STR recently reported that occupancy for the United States hotel industry declined in July for this first time in the past 12 months (-0.2 percent to 73.6 percent), fueled by a 1.9-percent decrease in demand. It was the lowest level since July 2017.
Moody’s Investor Service attributes the demand decline in part to fewer arrivals from international markets such as China, which is one of the top five markets for visitors to the U.S. Moody’s cites the current trade war between the country and the U.S. as a reason for the decrease. Air bookings from China to the U.S. are down 8.4 percent since the end of March (when the U.S. began imposing tariffs on China), according to ForwardKeys.
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While new monthly data for August will be out within the next week, Moody’s notes that preliminary data show occupancy growth is set to rebound to between 0 and 2 percent.
U.S. hotel room supply helps to tell the overall story of the industry. It is expected to grow 2 percent this year, which Moody’s notes is below the historical average but also a jump from the 1-percent gain saw in 2014.
Supply growth is mostly happening in the upscale and upper-midscale select-service segment within urban environments. Since 2013, growth in the upscale sector has outpaced growth of other segments, including luxury and upper-upscale. Over this past year, however, upper-midscale growth has outpaced those segments.
The upscale segment grew 5.7 percent year-to-date through July, according to STR. In the meantime, the upper-midscale segment grew 4.1 percent over the same time period. By comparison, total U.S. hotel room supply grew 2.1 percent.
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Meanwhile, consumer confidence is down from its March peak but still remains high, according to Moody’s. That’s been good news for revenue per available room, which has increased 3.5 percent year-to-date through July, according to STR data. That is a nice jump from the 2.7-percent growth seen during the same period last year.
Steady demand and supply growth in addition to increased pricing through the end of July will help to drive full-year results, according to Moody’s. The company expects that demand growth will outpace its forecast of 2 percent to grow between 2.5 and 3 percent. Year-end average-daily-rate growth is trending on the high end of the company’s 1- to 3-percent forecast. These figures will result in RevPAR growth of approximately 3 to 3.5 percent, well above Moody’s initial 1- to 3-percent forecast.