STR, TE lower 2019 U.S. RevPAR growth forecast below 1%

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STR and Tourism Economics forecast New York City and Seattle will see the steepest declines in revenue per available room in 2019. Photo credit: Getty Images/spyarm

STR and Tourism Economics adjusted their growth projections for U.S. hotel revenue per available room again, this time to below 1 percent. The two companies predicted the metric will grow 0.8 percent and 0.5 percent in 2019 and 2020, respectively.

STR and TE have repeatedly lowered their forecast for 2019 over the course of the year, but their most recent projection marks the most significant downgrade yet. In August, they predicted RevPAR would grow 1.6 percent in 2019; in June, they predicted 2 percent and in January they predicted 2.3 percent.

“U.S. hotels have posted nine straight years with RevPAR increases of basically 3 percent or higher, so growth levels below 1 percent will clearly represent the industry’s worst years since the recession,” Amanda Hite, STR’s president, said in a statement.

With occupancy at flat to slightly lower levels year-over-year—STR and TE forecasted a 0.2 percent dip in 2019 and a 0.4 percent decrease in 2020—average daily rate has been the sole driver of RevPAR growth. The two companies predicted ADR will grow 1 percent in 2019 and 0.9 percent in 2020.

“At the risk of sounding like a broken record, the major factor in our revisions continues to be a lack of pricing confidence,” Hite said. “Supply growth is coming in ahead of demand growth a bit sooner than expected, so occupancy levels are slightly lower than projected. The major difference is with ADR, where we downgraded by 80 basis points for 2019 and 60 basis points for 2020. ADR has grown below the level of inflation for five consecutive quarters.

STR and TE predicted supply will grow 2 percent in both 2019 and 2020, while demand will rise 1.8 percent and 1.5 percent, respectively.

“Fortunately, demand is going to continue to grow beyond the record levels the industry has already achieved,” said Hite. “Domestic travel continues to increase with forward-looking domestic air bookings remaining strong. Vacation intentions are also holding above last year’s levels. The trend that is not as positive, that could negatively affect demand, are the mixed results we’re seeing in overseas arrivals.”

Top 25 Markets

The two companies predicted 14 of STR’s top 25 markets will see RevPAR decrease for the year. They projected the steepest declines in Seattle and New York City. Of the 11 markets projected to report RevPAR growth, four are expected to see an increase of 3 percent or higher: Atlanta, Denver, Phoenix and San Francisco/San Mateo, Calif.

In aggregate, the top 25 markets are projected to have a worse RevPAR comparison, -0.5 percent, than all other markets. As of September, the top 25 markets underperformed the rest of the country in RevPAR growth for 11 of the past 12 months.

Among chain scale segments, STR and TE projected economy (0.4 percent) and independent (0.3 percent) likely will report the only occupancy increases. They forecasted luxury chains will post the largest growth rate in ADR (1.9 percent), while independents will see the highest jump in RevPAR (1.8 percent). Of the three segments projected to report RevPAR decreases for the year, upscale (-0.4 percent) and midscale (-0.4 percent) are forecasted for the steepest decline. All three chain scales projected for negative year-over-year RevPAR comparisons showed the highest supply growth.

For 2020, STR and TE predict 19 of the top 25 markets will see a RevPAR increase for the year, led by Miami/Hialeah, Fla. New York City is expected to record the steepest decline. The two companies predicted the luxury segment will see the highest rate of RevPAR growth, 1.6 percent, while upscale chains will see the steepest decline, 0.5 percent.