STR and Tourism Economics expect U.S. hotel revenue per available room (RevPAR) growth to fall below 1 percent for 2019 and 2020 in the final forecast revision for this year.
As of this past Monday, RevPAR is projected to grow just 0.8 percent to $86.68 for 2019 and only 0.5 percent to $87.10 for 2020. The figures mark the lowest growth rate since the Great Recession more than a decade ago.
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For perspective, STR and Tourism Economics’ forecast called for RevPAR increases of 1.6 percent and 1.1 percent in 2019 and 2020, respectively, as recently as August.
Seattle, Washington, D.C. and New York City are expected to experience the steepest declines in RevPAR this year. However, more than half of the top 25 markets are likely headed for a decrease in RevPAR for the year.
The final forecast isn’t entirely bleak though. Atlanta, Denver, Phoenix and San Francisco are among the 11 key markets projected to report RevPAR growth for 2019. Better yet, each of the four destinations is expected to experience an increase of 3 percent or higher.
Based on the final forecast revision for this year, U.S. hotel occupancy is projected to be down 0.2 percent to 66 percent for 2019 and down 0.4 percent to 65.7 percent for 2020 with average daily rate (ADR) climbing 1 percent this year to $131.29 and up 0.9 percent to $132.50 in 2020.
“U.S. hotels have posted nine straight years with RevPAR increases of basically 3 percent or higher, so growth levels below 1 percent will clearly represent the industry’s worst years since the recession,” said STR’s president, Amanda Hite, in a statement accompanying the hotel industry data company’s latest projection.
Hite also pointed out that “a lack of pricing confidence” continues to influence the revisions. “Supply growth is coming in ahead of demand growth a bit sooner than expected, so occupancy levels are slightly lower than projected,” she added. “The major difference is with ADR, where we downgraded by 80 basis points for 2019 and 60 basis points for 2020. ADR has grown below the level of inflation for five consecutive quarters.”
There’s reason for optimism, however, as Hite notes a continued growth in demand.
“Fortunately, demand is going to continue to grow beyond the record levels the industry has already achieved. Domestic travel continues to increase with forward-looking domestic air bookings remaining strong,” she stated. “Vacation intentions are also holding above last year’s levels. The trend that is not as positive, that could negatively affect demand, are the mixed results we’re seeing in overseas arrivals.”
