Hotel performance in the United States hasn't matched expectations so far this year, but 2024 is still expected to end on a growth note.
In a bonus episode of "Tell Me More: A Hospitality Data Podcast," CoStar National Director of Hospitality Analytics Jan Freitag and STR Vice President of Analytics Isaac Collazo unpack the downgrades in the latest 2024-2025 STR and Tourism Economics U.S. hotel forecast.
The prior forecast called for 2024 to end with U.S. hotel revenue-per-available-room growth of 4% year over year, and the latest revision now predicts 2% growth year over year.
"It's still growth," Freitag said. "The economy sector is just unfortunately taking it on the chin, and we expect RevPAR to decelerate, but the upper end of the market continues to just chug along."
Collazo explained that U.S. hotel RevPAR grew only 0.5% the first four months of the year. That lower-than-expected growth, on top of economic factors such as inflation curbing spending for people at lower income levels, played a role.
"We knew GDP was going to get stronger, which it did," Collazo said. "But early this year and late last year we saw a decoupling of GDP and demand. We expected it to narrow as we got into 2024, meaning, we expected it to get back to its historical play — as the economy grows, so does demand. Well, that didn't happen."
The difference played out in hotel chain scales, Freitag and Collazo explained, and there has been bifurcation between the high end and the low end.
High-income households continue to spend; they're less affected by inflation and that plays out in hotel demand for upper upscale, upscale and luxury hotels, Collazo said.
But increasing pressures such as credit card debt are curbing travel spending for lower-income households. Those demand drops drag the total numbers down.
"But we actually do expect things to improve this year," Collazo said. "Remember, we're going from 0.5% RevPAR growth in the first four months to a full year at 2%. That implies an improvement."
Freitag reminded listeners that hoteliers remain bullish on group, leisure and corporate transient demand at higher-end hotels typically used by those types of travelers.
For more from this episode, listen to the podcast embedded above.
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