Intelligent Investment

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

A Pictorial Update on Our Latest Thoughts and the Facts and Figures Influencing Our Industry

April 12, 2024 2 Minute Read

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Key Takeaways:

  • Economy

    CBRE raises 2024 GDP growth outlook fueled by 1Q.
    CBRE expects 1Q24 GDP growth of 2.1% and full-year growth of 2.2%, above the long-run average of 2.1%. This is 61 basis points higher than previously forecast. Employment growth is expected to be 0.6%, +10bps vs prior, and with slightly more persistent inflation of 2.8% +30bps over prior. 

    Wage growth is above inflation, but RevPAR contracted again in February.
    Despite solid wage growth, declining airfares, and improving consumer sentiment, RevPAR growth declined for the third straight month in Feb. While consumers have the means to travel, dwindling COVID savings and below-average savings rates could be a headwind going forward.

    The number and size of CMBS loans increased in February.
    Despite higher interest rates, February hotel CMBS loan counts more than doubled, increasing from 8 to 17, and loan origination size increased as well, reaching $0.4 billion, up from $0.1 billion a year ago.

  • Current Trends

    February RevPAR growth was negative for the third straight month, down 1.5%.
    A 0.4% increase in ADR did not offset a 1.9% decrease in occupancy, which was driven in part by a 1.3% drop in demand. Historically, declines in demand have preceded declines in ADR potentially foreshadowing a further headwind to RevPAR going forward.

    Resorts were the only location type to register RevPAR gains in February.
    Resorts outperformed all other location types, posting the only gain, up 0.9% year-over-year in February. Luxury and Upper Upscale posted the only positive chain scale performance during the month, up 2.7% and 2.0% year-over-year, respectively.

    Elevated costs meant total revenue growth failed to translate into profits.
    January’s total revenue growth of 3.0% failed to offset the 220-basis point contraction in margins, causing a 5.7% decrease in GOP dollars as labor costs from rising wages continued to pressure operating profit.

  • Food for Thought

    Short-term rentals continued to take market share in February.
    Short-term rental demand rose 11.7%, outpacing the 1.3% decline in hotel demand. Short-term rental RevPAR was positive for the first time in 16 months, up 0.8% year-over-year. This compares with hotel RevPAR, which contracted 1.5% year-over-year.

    Outbound international travel continues to outperform inbound.
    Outbound international travel was 122% of 2019’s level in February compared to inbound visitation of 87%. Outbound travel to Europe, the Caribbean, and Asia have all recovered. Inbound visitation from Asia continues to lag at 72% of 2019 in February.

    TSA throughput increased 7.3% year-over-year in March.
    TSA throughput reached 107% of 2019 levels during the month. Despite continued strength in passenger volumes, searches for paid and redemption travel remained soft in March, and RevPAR in Airport locations declined 2.3% year-over-year in February.

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