Moody’s: U.S. occupancy decline not a trend

Photo credit: Pixabay/davidlee770924

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.

Source: STR

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.

Related Story: Occupancy hits 30-year high in U.S.

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.

FREE DAILY NEWSLETTER

Like this story? Subscribe to IHIF!

The hospitality industry turns to IHIF International Hotel Investment News as the must-read source for investment and development coverage worldwide. Sign up today to get inside the deal with the latest transactions, openings, financing, and more delivered to your inbox and read on the go.

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.

Related Story: U.S. hotel forecasts continue to look up

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.

Related Story: 5 things shaping U.S. hotel investment

Suggested Articles

New developments and revitalization projects in major urban centers continue to create more demand for hotels in established markets.

The Secrets Lanzarote Resort is a conversion of the former Hesperia Lanzarote in Spain's Canary Islands. 

The debuts consisted of a Hotel RL in St. Louis, a Tru by Hilton in Springfield and a SpringHill Suites by Marriott in Kansas City.