Denver, CO
Denver Lodging Market on Pace for 2023/2024 Recovery
June 10, 2022
Media Contact
Sara Johnston
Director, Mktg & Comm
Denver’s hotel market is marching toward recovery with several performance metrics forecasted to exceed pre-pandemic levels by 2024, according to CBRE Hotels Research’s May report. Nationally, CBRE is raising its forecasts of hotel performance for 2022 and beyond, based on Q1 2022 strength, continued slowing of construction activity, higher inflation and continued optimism about employment and economic growth.
Hotel occupancy in Denver is forecast to rise 7.7 percent this year, averaging 63 percent for 2022. This is still below pre-pandemic levels; average occupancy in 2019 was 73 percent. From here, CBRE forecasts occupancy to continue to rise over the next several years, reaching 72 percent in 2024, just shy of pre-pandemic levels.
Two other hotel performance metrics—average daily rate (ADR) and revenue per available room (RevPAR)—are on pace to exceed pre-pandemic levels within the next two years. ADR, which averaged $136.68 in 2019, is forecast to hit $131.42 this year and to exceed pre-pandemic rates by 2023 at $139.39. RevPAR’s recovery is forecast to take one additional year, surpassing 2019’s rate of $100.32 by 2024, reaching $105.42 that year. This year, RevPAR is anticipated to increase 21 percent year-over-year, averaging $83.20.
Denver’s recovery is well underway from the trough experienced in 2020, when occupancy dropped to 41 percent, ADR to $95.13 and RevPAR to $38.81. Yet Denver lags the national forecast, which calls for a full recovery in ADR in 2022 and in RevPAR in 2023.
“Denver’s recovery trails the national forecast due to the large amount of new supply introduced into the market within the past five years, or that was in the construction pipeline prior to the onset of the pandemic. The bulk of new supply since 2017 largely consists of upper and mid-priced properties—categories most negatively impacted by the pandemic. The good news is that upper and mid-priced properties are forecast to see the largest gains in demand and RevPAR in Denver over the next five years,” said Zachary Alm, vice president with CBRE’s Valuation & Advisory Services in Colorado.
National Outlook
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.”
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.
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. Denver’s hotel supply pipeline is stronger, anticipated to increase 3.2 percent in 2022.
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.
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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.
Hotel occupancy in Denver is forecast to rise 7.7 percent this year, averaging 63 percent for 2022. This is still below pre-pandemic levels; average occupancy in 2019 was 73 percent. From here, CBRE forecasts occupancy to continue to rise over the next several years, reaching 72 percent in 2024, just shy of pre-pandemic levels.
Two other hotel performance metrics—average daily rate (ADR) and revenue per available room (RevPAR)—are on pace to exceed pre-pandemic levels within the next two years. ADR, which averaged $136.68 in 2019, is forecast to hit $131.42 this year and to exceed pre-pandemic rates by 2023 at $139.39. RevPAR’s recovery is forecast to take one additional year, surpassing 2019’s rate of $100.32 by 2024, reaching $105.42 that year. This year, RevPAR is anticipated to increase 21 percent year-over-year, averaging $83.20.
Denver’s recovery is well underway from the trough experienced in 2020, when occupancy dropped to 41 percent, ADR to $95.13 and RevPAR to $38.81. Yet Denver lags the national forecast, which calls for a full recovery in ADR in 2022 and in RevPAR in 2023.
“Denver’s recovery trails the national forecast due to the large amount of new supply introduced into the market within the past five years, or that was in the construction pipeline prior to the onset of the pandemic. The bulk of new supply since 2017 largely consists of upper and mid-priced properties—categories most negatively impacted by the pandemic. The good news is that upper and mid-priced properties are forecast to see the largest gains in demand and RevPAR in Denver over the next five years,” said Zachary Alm, vice president with CBRE’s Valuation & Advisory Services in Colorado.
National Outlook
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.”
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.
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. Denver’s hotel supply pipeline is stronger, anticipated to increase 3.2 percent in 2022.
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.