Nashville, TN
Consistent Optimism on Economic Outlook Fuels Rising Growth Forecast for Nashville Hotels Through 2022 and Beyond
U.S. Lodging Market Should Recover Fully by 2023
June 9, 2022
Media Contact
Derek Paumen
Sr Communication Specialist
CBRE has raised its Nashville lodging industry’s growth forecast through the rest of 2022 and beyond, based on Q1 2022 strength, continued slowing of construction activity, higher inflation and continued optimism about employment and economic growth.
According to CBRE Hotels Research State of the Union May 2022 edition, the Nashville lodging market’s revenue per available room (RevPAR) is expected to increase 33.2 percent to $110.96 by the end of 2022, up from $83.33 a year earlier and eclipsing the national average of $72.20 seen so far in Q1. RevPAR growth is determined by average daily rate (ADR) and occupancy, each of which is expected to increase through 2022 by 18.8 percent and 12.1 percent, respectively.
“The Nashville lodging market is expected to have a better year than what CBRE originally forecasted, specifically as it relates to the leisure segment and leisure travelers,” said Tim Dick, Executive Vice President, Hotel Advisory & Asset Management, CBRE Hotels. “This increasing momentum will likely carry into 2023, which is when CBRE expects the U.S. lodging industry to fully recover to pre-pandemic RevPAR levels, especially amongst lower-priced, mid-scale and economy hotels.”
Gas Prices Rise; U.S. Economic Outlook Remains Strong
Despite headwinds from the Omicron variant, Q1 RevPAR reached $72.20 nationally, up 61 percent from year earlier. RevPAR growth was driven by a 39 percent increase in ADR and a 16 percent increase in occupancy. CBRE’s forecasts call for a full recovery in ADR in 2022 and in demand and RevPAR in 2023.
Trends strengthened over the quarter as Omicron concerns faded and spring break drove demand. In Q1, ADR was 5 percent ahead of 2019’s levels, marking the third consecutive quarter in which levels exceed the same period in 2019. These rising rates demonstrate that travelers aren’t price-sensitive in many peak-demand markets.
Since year-end 2021, several factors, such as the Russia-Ukraine war, high gas prices and the 19 percent pullback in the S&P 500 have increased the risk of a potential slowdown. However, for now, CBRE Econometric Advisors (CBRE EA) continues to forecast positive GDP and employment growth and continued elevated Consumer Price Index (CPI) through 2023.
“To date, there has been no sign that the more than 50 percent increase in gas prices and the stock market’s hovering near bear-market territory are dampening hotel demand,” said Rachael Rothman, CBRE’s Head of Hotel Research & Data Analytics.
“However, in the past, a steep decline in the S&P 500 and high gas prices have often caused RevPAR growth to decline, which raises the specter of a pullback in RevPAR later this year,” she said. “Despite this possibility, our outlook remains that the market will continue to recover.”
High-End Leisure Hotels Lead the Way
CBRE Hotels Research continues to expect better relative performance in drive-to leisure destinations, particularly among high-end properties where consumers are less price sensitive and the impact of inflation may be less severe. Higher gas prices, food costs and mortgage rates could dissuade budget-minded consumers who frequent interstate hotels from making travel plans.
Inflation continues to bolster top-line growth, but it is also a headwind to margin expansion given rising wages, utilities, food and beverage costs, insurance, and capital expenditure (CapEx) increases. Historically, luxury hotels have had the greatest pricing power.
Longer term, muted supply growth will bolster top-line growth. High construction-material prices, including lumber, steel, and labor, make the development of new projects cost prohibitive. CBRE forecasts that supply will increase at a 1.2 percent compound annual growth rate over the next five years, below the industry’s 1.8 percent long-term historical average.
CBRE Hotels Research’s base case scenario forecasts do not contemplate a larger-scale war, a recession, nor a more acute COVID variant. All clients are encouraged to review the scenario analysis for a more comprehensive view of the range of potential outcomes.
* * *
The May 2022 edition of Hotel Horizons for the U.S. lodging industry, 65 major markets, the six hotel chain scales and six location types can be purchased by visiting: https://pip.cbrehotels.com.
According to CBRE Hotels Research State of the Union May 2022 edition, the Nashville lodging market’s revenue per available room (RevPAR) is expected to increase 33.2 percent to $110.96 by the end of 2022, up from $83.33 a year earlier and eclipsing the national average of $72.20 seen so far in Q1. RevPAR growth is determined by average daily rate (ADR) and occupancy, each of which is expected to increase through 2022 by 18.8 percent and 12.1 percent, respectively.
“The Nashville lodging market is expected to have a better year than what CBRE originally forecasted, specifically as it relates to the leisure segment and leisure travelers,” said Tim Dick, Executive Vice President, Hotel Advisory & Asset Management, CBRE Hotels. “This increasing momentum will likely carry into 2023, which is when CBRE expects the U.S. lodging industry to fully recover to pre-pandemic RevPAR levels, especially amongst lower-priced, mid-scale and economy hotels.”
Gas Prices Rise; U.S. Economic Outlook Remains Strong
Despite headwinds from the Omicron variant, Q1 RevPAR reached $72.20 nationally, up 61 percent from year earlier. RevPAR growth was driven by a 39 percent increase in ADR and a 16 percent increase in occupancy. CBRE’s forecasts call for a full recovery in ADR in 2022 and in demand and RevPAR in 2023.
Trends strengthened over the quarter as Omicron concerns faded and spring break drove demand. In Q1, ADR was 5 percent ahead of 2019’s levels, marking the third consecutive quarter in which levels exceed the same period in 2019. These rising rates demonstrate that travelers aren’t price-sensitive in many peak-demand markets.
Since year-end 2021, several factors, such as the Russia-Ukraine war, high gas prices and the 19 percent pullback in the S&P 500 have increased the risk of a potential slowdown. However, for now, CBRE Econometric Advisors (CBRE EA) continues to forecast positive GDP and employment growth and continued elevated Consumer Price Index (CPI) through 2023.
“To date, there has been no sign that the more than 50 percent increase in gas prices and the stock market’s hovering near bear-market territory are dampening hotel demand,” said Rachael Rothman, CBRE’s Head of Hotel Research & Data Analytics.
“However, in the past, a steep decline in the S&P 500 and high gas prices have often caused RevPAR growth to decline, which raises the specter of a pullback in RevPAR later this year,” she said. “Despite this possibility, our outlook remains that the market will continue to recover.”
High-End Leisure Hotels Lead the Way
CBRE Hotels Research continues to expect better relative performance in drive-to leisure destinations, particularly among high-end properties where consumers are less price sensitive and the impact of inflation may be less severe. Higher gas prices, food costs and mortgage rates could dissuade budget-minded consumers who frequent interstate hotels from making travel plans.
Inflation continues to bolster top-line growth, but it is also a headwind to margin expansion given rising wages, utilities, food and beverage costs, insurance, and capital expenditure (CapEx) increases. Historically, luxury hotels have had the greatest pricing power.
Longer term, muted supply growth will bolster top-line growth. High construction-material prices, including lumber, steel, and labor, make the development of new projects cost prohibitive. CBRE forecasts that supply will increase at a 1.2 percent compound annual growth rate over the next five years, below the industry’s 1.8 percent long-term historical average.
CBRE Hotels Research’s base case scenario forecasts do not contemplate a larger-scale war, a recession, nor a more acute COVID variant. All clients are encouraged to review the scenario analysis for a more comprehensive view of the range of potential outcomes.
* * *
The May 2022 edition of Hotel Horizons for the U.S. lodging industry, 65 major markets, the six hotel chain scales and six location types can be purchased by visiting: https://pip.cbrehotels.com.
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 2024 revenue). The company has more than 140,000 employees (including 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.