CBRE Hotels Expects RevPAR Growth in 2024 Fueled by Higher Rates and Stronger Demand

CBRE is forecasting revenue per available room (RevPAR) will continue to grow steadily in 2024, driven by improving group business, inbound international travel and traditional transient business demand.

CBRE forecasts a 3.0% increase in RevPAR growth in 2024, with occupancy improving by 45 basis-point (bps) and average daily rate (ADR) increasing by 2.3%. This projected growth indicates the continued recovery of the lodging industry, with RevPAR in 2024 expected to be 13.2% higher than 2019 levels.

CBRE’s baseline forecast anticipates GDP growth of 1.6% and average inflation of 2.5% in 2024. Given the typically strong correlation between GDP and RevPAR growth, the relative strength of the economy will directly impact the performance of the lodging industry.

“We expect RevPAR growth to be slower in the first quarter due to last year's strong performance, but to reach its peak in the third quarter driven by the influx of inbound international travelers during the busy summer season,” said Rachael Rothman, CBRE’s Head of Hotel Research & Data Analytics. “Urban and airport locations should particularly benefit from group and inbound international travel, as well as the normalization of leisure travel.”

In 2023, the U.S. economy exceeded expectations with a GDP growth rate of 2.5%, resulting in record RevPAR of $95.84, a 3.2% year-over-year increase. RevPAR growth was driven by a 2.7% increase in ADR and 0.31 percentage point increase in occupancy. This growth was driven by group business and inbound international travel, and an uptick in traditional transient business demand.

“Despite the upside surprises in employment and GDP growth in 2023, lodging demand fell short of initial expectations due to the popularity of lodging alternatives like cruises and short-term rentals,” said Michael Nhu, Senior Economist and CBRE’s Head of Global Hotels Forecasting. CBRE expects muted supply growth in the medium term due to elevated financing and construction costs, as well as the limited availability of properties that can be purchased below replacement costs. For 2024, CBRE expects supply growth of just under 1%, with hotel supply projected to maintain a compound annual growth rate (CAGR) of 0.87% over the next three years.