Seattle, WA
Seattle Lodging Market on Pace for Recovery by 2024
June 10, 2022
Media Contact
Sara Johnston
Director, Mktg & Comm
Seattle’s hotel market, hit hard by the pandemic in 2020, is marching toward recovery with several performance metrics anticipated to meet or 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 dropped a staggering 51 percent in 2020 across the Puget Sound region, from 74 percent in 2019 to an average of just 36 percent in 2020. Occupancy recovered somewhat in 2021, averaging 52 percent, and is on pace for more significant gains in the years ahead. CBRE forecasts occupancy to hit 60 percent in 2022 and to reach near pre-pandemic levels by 2024 at 71 percent.
Average daily rates (ADR) and revenue per available room (RevPAR) are both forecast to exceed pre-pandemic levels by 2024 in the Puget Sound region. In 2019, ADR was $160.28 and RevPAR was $118.96. The two metrics dropped precipitously when the pandemic hit in 2020, down 35 and 68 percent respectively. They made gains in 2021 and are forecast to reach $144.04 and $86.37 this year. By 2024, both ADR and RevPAR are expected to surpass pre-pandemic rates.
Greater Seattle’s forecast for recovery lags the national outlook, which calls for a full recovery in ADR in 2022 and in RevPAR in 2023.
“A few factors are hindering Seattle’s hotel recovery. International travel, specifically from Asia, has been slow to return. A lot of companies are still rolling out their return-to-office plans, which has limited business travel. Convention business is starting to pick back up but is not at pre-pandemic levels of attendance. And, finally, the weather has not helped tourism in Seattle this year. One bright spot is the cruise industry. The industry is expecting pent-up demand to result in record levels of passengers in Seattle this year, which will buoy hotels in the market,” said Alan Jutte, vice president with CBRE Hotels Advisory.
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. Supply in Seattle’s hotel sector is forecast to be hover between 1.1 and 1.5 percent over the next three years.
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 dropped a staggering 51 percent in 2020 across the Puget Sound region, from 74 percent in 2019 to an average of just 36 percent in 2020. Occupancy recovered somewhat in 2021, averaging 52 percent, and is on pace for more significant gains in the years ahead. CBRE forecasts occupancy to hit 60 percent in 2022 and to reach near pre-pandemic levels by 2024 at 71 percent.
Average daily rates (ADR) and revenue per available room (RevPAR) are both forecast to exceed pre-pandemic levels by 2024 in the Puget Sound region. In 2019, ADR was $160.28 and RevPAR was $118.96. The two metrics dropped precipitously when the pandemic hit in 2020, down 35 and 68 percent respectively. They made gains in 2021 and are forecast to reach $144.04 and $86.37 this year. By 2024, both ADR and RevPAR are expected to surpass pre-pandemic rates.
Greater Seattle’s forecast for recovery lags the national outlook, which calls for a full recovery in ADR in 2022 and in RevPAR in 2023.
“A few factors are hindering Seattle’s hotel recovery. International travel, specifically from Asia, has been slow to return. A lot of companies are still rolling out their return-to-office plans, which has limited business travel. Convention business is starting to pick back up but is not at pre-pandemic levels of attendance. And, finally, the weather has not helped tourism in Seattle this year. One bright spot is the cruise industry. The industry is expecting pent-up demand to result in record levels of passengers in Seattle this year, which will buoy hotels in the market,” said Alan Jutte, vice president with CBRE Hotels Advisory.
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. Supply in Seattle’s hotel sector is forecast to be hover between 1.1 and 1.5 percent over the next three years.
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.