U.S. Hotels State of the Union January 2024 Edition

Key Takeaways

• Economy

  • CBRE now expects 1.2% GDP growth in 2024, eliminating recession call.
    The stronger GDP growth outlook is predicated on four Fed interest rate cuts, moderating inflation, and 0.7% employment gains.
  • Excess savings declined, and checkable deposits decreased.
    Excess savings have declined over 60% since January 2023, and checkable deposits declined 13% in Q3 2023 Y-o-Y. Despite these declines consumer leverage remains in check on both a real and nominal basis, and wages are outpacing inflation.
  • Credit spreads have pulled back from post-pandemic highs.
    Spreads and interest rates have both declined year-over-year, pulling back to 151 bps and 90 bps, respectively; however, they are still well above pre-pandemic averages.

• Current Trends

  • Short-term rentals continue to take share from hotels.
    Hotel demand growth declined 2.1% in November, while short-term rental demand rose 8.0%. However, pandemic-fueled occupancy gains for STRs have been erased, causing RevPAR to decline by 4.3%.
  • The gap between inbound and outbound international travel persists.
    The gap between inbound and outbound international travel widened to 33.3 percentage points in November, with some West Coast markets experiencing a noticeable pullback during the month.
  • TSA throughput is up 7.9% December month-to-date.
    MTD, TSA throughput is running 101%of 2019, and it’s up 7.9% year over year. Demand for alternative lodging sources like cruises and short-term rentals continued to outpace hotel demand.

• Food for Thought

  • November RevPAR declined 1.7% on a 2.8% decline in occupancy.
    RevPAR contraction in the lower price tiers contributed to overall RevPAR declines. Urban hotels were the only location type to post positive RevPAR growth during the month.
  • RevPAR in more markets experienced contraction versus growth in November.
    52% of 65 Hotel Horizons markets experienced declining RevPAR in November, up from 49% in October and 42% in September.
  • GOP margins contracted in October as wages continued to increase.
    Despite a 2.6% increase in total revenues, GOP margins contracted 1.3 percentage points, resulting in a 0.6% decline in GOP dollars. We expect margins to continue to be under pressure in 2024.