CBRE Hotels Americas Research is forecasting the nation’s hotels will enjoy a 10th consecutive year of growth in 2019. According to the December 2018 edition of Hotel Horizons, U.S. hotel occupancy will rise to 66.2 percent next year.
The primary result of the growth in occupancy is a projected 2.1 percent increase in demand. While lodging demand for the entire U.S. market is forecast to increase, the demand for accommodations in the 60 markets covered by CBRE is projected to grow by a strong 3.3 percent. This is significant because the majority of hotel investment activity occurs in the nation’s largest cities.
Mark Woodworth, the senior managing director of CBRE Hotels Americas Research commented,
“It all starts with the demand for lodging accommodations. Without leisure, corporate and group travelers on the road seeking hotel rooms, there is no need to worry about all the other performance metrics. From 1988 through 2017, the average annual gain in accommodated room nights in the U.S. was 2.0 percent. For 2018 and 2019, we believe demand growth will exceed this long-run average.”
The forecasting model used for this projection identifies the historical relationship between the changes in the nation’s economy and changes in lodging demand. These relationships then are applied to project future demand.
John (Jack) B. Corgel, Ph.D., professor of real estate at the Cornell University School of Hotel Administration and senior advisor to CBRE Hotels Americas Research stated,
“CBRE Econometric Advisors (CBRE-EA) is our in-house source for the economic forecasts that drive our models. After analyzing data through the third quarter of 2018, CBRE-EA issued an upward revision to its outlook for U.S. Gross Domestic Product in 2018 and 2019.
“We have already seen the positive influence these factors have on the economy, and lodging industry, in 2018. The impact will persist in 2019.”
With so many consecutive years of record occupancy levels and demand growth, hotel owners and operators worry about the inevitable time when this period of extended prosperity will come to an end.
Looking ahead
CBRE is not forecasting any economic or lodging industry recessions through 2022. However, industry growth is forecast to curtail beyond 2019. CBRE-EA sees higher interest rates, equity market corrections, credit-market problems and some shrinkage in employment as risk factors occurring in late 2019 and 2020 that adversely will affect the lodging industry in 2021. Fortunately, the economic slowdown is expected to be relatively mild and short.
The December 2018 edition of Hotel Horizons can be purchased here.
