Dive Brief:
- U.S. RevPAR hit record highs in 2023 and will continue to grow this year, according to CBRE’s 2024 Global Hotels Outlook, released last week.
- Heightened international travel and group and meetings business — as well as continued leisure demand — will push 2024’s year-on-year RevPAR growth to approximately 3%, CBRE predicts.
- While good news for hoteliers, that growth could still be tempered by cost increases, a tight labor market, wage growth and other factors impacting cash flow, CBRE said.
Dive Insight:
In 2024, higher-end hotels will continue to outperform, according to CBRE, with luxury and upper upscale hotel RevPAR expected to grow 3.8% and 3.7%, respectively, year over year.
The strongest RevPAR growth will occur in urban locations, which will benefit the most from the recovery of inbound international travel, group demand and traditional corporate travel’s “modest improvement.” The return of international travelers, in particular, could lift occupancy by as much as 1.1 percentage points year-over-year.
Gross operating profit margins, however, will continue to experience pressure from cost increases related to a “renewed focus” on brand standards, a tight labor market and wage growth. Higher insurance costs and property taxes will also impact operational expenditures, and increased construction costs could “impact cash flows,” CBRE said.
In 2023, there were winners and losers. Several hotel markets ended the year with RevPAR well above pre-pandemic levels. New York City, in particular, benefitted not only from strong recovery but also Airbnb restrictions that led to record-high ADRs. JLL has also predicted that the city’s RevPAR would continue to grow in 2024, following historic highs.
But “laggards” include some markets in California, the Pacific Northwest and the upper Midwest, “where migration outflows, rising crime and political issues have created tension,” according to CBRE. Those markets may require several more years for RevPAR to recover.
CBRE predicts that short-term interest rates will decline in 2024 — good news for hotel investment volumes. Trophy assets and boutique hotels, in particular, will be attractive to investors this year, as will “group hotels with leisure appeal and newly renovated premium select-service hotels.”
JLL has similarly forecast investor interest in select service hotels, noting the sector, as well as extended stay hotels, will drive investment appeal to “unprecedented levels.”
Earlier this year, Ian Gaum, partner at Newbond Holdings, told Hotel Dive that he expects “broad-based and healthy RevPAR growth in 2024” and occupancy “closer to pre-pandemic levels.”
Guam also highlighted the importance of “primary major urban markets” such as New York City.
