Outlook gloomy at hotel investment summit

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STR president Amanda Hite at the Americas Lodging Investment Summit. Source: STR

LOS ANGELES -- With geopolitical uncertainty and a potential global health crisis looming, hotel analysts took a fairly pessimistic stance on the year ahead at the Americas Lodging Investment Summit (ALIS).

“We’re dealing with many of the same uncertainties we’ve been talking about for the last three years,” said Amanda Hite, president of hotel data firm STR. “Though, obviously, coronavirus was not something that we were thinking about at the end of last year.”

STR released details on its latest U.S. hotel forecast, further downgrading predicted growth in revenue per available room (RevPAR) to flat for 2020.

Previously, STR had forecast RevPAR to increase 0.5% this year.  For 2019, U.S. RevPAR was up a modest 0.9%, which STR reported was the industry’s worst year for annual RevPAR growth since the Great Recession of the late 2000s.

STR also lowered its expectations for occupancy, which is expected to fall 0.3% for 2020. Supply is projected to continue to slightly outpace demand, at 1.9% and 1.6% growth, respectively.

Most worryingly, added Hite, is that average daily rate (ADR) is projected to remain near-flat with just a 0.3% gain this year. 

“Supply is more of an issue right now because you have demand growth at roughly the same pace,” she said. “When you have demand far outpacing supply, it’s a lot easier to drive rate. But we’re at that equilibrium point. And there’s a good chance that the rate growth will be less than [what we’re] forecasting for 2020.”  

Cindy Estis Green, CEO and cofounder of Kalibri Labs, echoed Hite’s concerns, while also emphasizing the impact from myriad macro factors, including ongoing U.S. tensions with Iran and Russia and the upcoming 2020 presidential election.

“It’s not just that overall rate growth will be slow,” said Estis Green. “There’s just a lot going on [globally]. And I think there’s a tendency or knee-jerk reaction to want to cut rates when uncertainty is strong. Hotels look at each other all the time, and when everyone’s looking at one another and trying to match rates, it can cause a race to the bottom.”

Next year, however, STR expects to see a slight rebound, with Hite crediting high consumer confidence and growing wages with helping to buoy the industry in the near-term. For 2021, RevPAR is predicted to increase 0.5% and ADR is expected to be up 0.6%. Occupancy is projected to remain relatively flat, while supply will likely continue growing at 1.9% as demand lags just behind at 1.7% growth.

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