U.S. Hotels State of the Union September 2023 Edition
A Pictorial Update on Our Latest Thoughts and the Facts and Figures Influencing Our Industry
Key Takeaways:
Current Trends
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The economy appears strong and the consumer is healthy.
Second quarter GDP was 2.4% and 3Q is estimated to be in a range from 1.6% to 5.9%. Fueled by excess savings, the summer has been strong for overseas travel and short term rental demand. -
Q2 brought purchasing power for travelers.
Consumers have money to travel as wage growth has outpaced RevPAR and airfare. Recent Declines in airfares have driven YTD TSA throughput to recover to 2019 levels. -
Despite macro strength, US hotel KPIs are weakening.
July RevPAR fell 1.2% due to occupancy, down by 2.1%, partially offset by a modest increase in ADR, up 1.0%. Markets in contraction continue to increase.
Hotel KPIs
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Higher-priced hotels outperformed in July.
As demand for temporary housing has subsided post-pandemic, RevPAR trends in the lower tier have begun to normalize. The most recent pockets of strength are in the higher-priced hotels. -
Two additional location types inflected to RevPAR declines in July.
Between June and July, two additional location types, suburban and town, began to post negative RevPAR growth while RevPAR in interstate and Resort locations softened further. -
Hotel margins and profits remain under pressure.
Overall, profits have been declining for three months because of continued wage growth, up 5.5% in July, a CAGR of 8.0% since the beginning of the pandemic.
Food for Thought
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RevPAR growth forecasts were revised down.
We are lowering our 2023 RevPAR growth forecast from 6.0% to 4.6% owing to a weaker-than-expected Q2 2023. -
Early indicators of property distress are increasing.
Profit declines are contributing to an uptick in delinquencies, from 5.4% to 5.9%. This could be a precursor to increases in special servicing down the road. -
Average hotel CMBS hit a post-pandemic low of 7 originations.
The three-month moving average in CMBS hotel originations fell to 7 down from 19 a year ago. The declines are likely due to higher interest rates and widening credit spreads in July.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world's largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
