The hotel industry seller’s market has been going strong for 100 consecutive months, and revenue per available room (RevPAR) is expected to continue rising through 2020, according to the March 2019 edition of “Hotel Horizons” from CBRE Hotels Americas Research. However, while meeting professionals will still have to negotiate hard to get the rates and concessions they need, there may be a bright spot on the 2021 horizon.

Basing its projections on anticipated increases in Gross Domestic Product (GDP) — a key indicator of the health of the economy as a whole — CBRE is forecasting lodging demand to grow by 1.9 percent this year and 1.2 percent in 2020. But it also expects lodging demand to drop 0.1 percent in 2021, commensurate with a similar slight slowdown in the overall economy.

Similarly, while RevPAR is expected to grow 2.5 percent this year and another 2 percent in 2020, CBRE is projecting an overall 0.6 percent decline in RevPAR in 2021. The lower-priced hotel chains will see more of a decline — 1.3 percent on average — while upscale properties are expected to see RevPAR decreases averaging only 0.8 percent.

That 2021 RevPAR decline may open a window for more wiggle room in group negotiations. But be prepared to move fast, because the planner advantage will likely be a short-lived blip, said R. Mark Woodworth, senior managing director of CBRE Hotels Americas Research. “In fact, we see the U.S. hotel market bouncing back strong in 2022 with a 2.5 percent increase in demand.”

ADR Growth Slows
Occupancy rates — one of the main factors that drives RevPAR, along with average daily rates (ADR) — are expected to outpace the long-run average annual occupancy level through 2023. However, even though occupancy levels are expected to remain high for the next several years, ADR also is likely to fall below inflation in 2021 and 2022 due to factors such as more competition from nontraditional types of lodging and the intervention of intermediary sales channels, said John B. Corgel, Ph.D., professor of real estate at the Cornell University School of Hotel Administration and a CBRE senior advisor.

“Another factor that we recently have analyzed is the elevated level of uncertainty that has infiltrated the minds of hotel guests. Since 2008, the level of uncertainty within the U.S., as measured by PolicyUncertainty.com, has risen by 30 percent over the previous 20 years. We suspect that incidents such as the banking crisis, European debt defaults, Brexit and U.S. government shutdowns made travelers feel uneasy,” Corgel explained.

“What do people do when they feel uncertain about the future? I contend that they hesitate to make discretionary purchase decisions. In the hotel business, this means shorter booking times, a decline in nonessential travel and enhanced price sensitivity. Our analysis estimates that U.S. average daily rates are roughly 0.5 percent lower than they would be without these elevated levels of uncertainty,” Woodworth said. — Sue Pelletier