Dive Brief:
- STR and Tourism Economics maintained their 2024-25 hotel performance outlook at midyear 2024, making only slight adjustments to ADR and occupancy, according to a report published last week.
- The companies downgraded their projected 2024 ADR gains by 0.1 percentage points and upgraded their forecast for this year’s occupancy by 0.2 percentage points. Their outlook for 2024 RevPAR remained steady at 2% year-over-year growth.
- The firms held their forecast for 2025 ADR and RevPAR increases steady at 2% and 2.6%, respectively, and increased their occupancy projection by 0.2 percentage points. Upper-tier segments will see the highest RevPAR growth in both 2024 and 2025, driven by changing traveler behavior, according to STR President Amanda Hite.
Dive Insight:
STR and Tourism Economics forecast that in 2024, occupancy will stand at 63%, while ADR and RevPAR will each increase 2% year over year. Growth will remain concentrated in the upper-tier segments, with upper upscale and upscale seeing the highest percentages of growth in 2024, according to the report.
Traveler behavior will impact performance metrics, Hite noted. “Midscale and Economy hotels are continuing to feel the effect of fewer lower-income travelers,” she said in a statement. “On the other hand, high-income households continue to travel, but domestic levels are constrained due to an increase in outbound travel.”
STR and Tourism Economics predict that in 2025 occupancy will be 63.4%, and ADR and RevPAR will increase 2% and 2.6%, respectively. Upper-tier segments will again lead growth, with the upper upscale, upscale and upper midscale segments all forecasted to see more than 3% growth, the report detailed.
“Economic growth is expected to be slower next year, but with strong household balance sheets, a gradual upswing expected in business investment, and moderating inflation, we anticipate a favorable context for moderate travel growth,” said Aran Ryan, director of industry studies at Tourism Economics, in the report.
Additional gains in international inbound travel, as well as in business and group travel, will also support lodging demand growth in 2025, according to Ryan. In the second quarter of 2024, heightened business and group travel buoyed several major hotel companies’ revenue gains.
Annual gross operating profit and EBITDA margins are forecasted to improve slightly this year and at a higher rate in 2025 due to lower labor costs, Hite said.
Labor costs are “set to decrease slightly for a majority of the chain scales,” Hite added, noting that upper midscale chains are expected to maintain the lowest labor costs in 2024.
According to the American Hotel and Lodging Association, though, U.S. hotels are projected to pay employees a record $123 billion in wages, salaries and other compensations this year, up 4% annually. And thousands of hotel workers across the country have authorized strikes, seeking higher wages.
