The supply of hotel rooms entering U.S. lodging markets will peak this year, according to new research published in the March 2018 edition of Hotel Horizons. CBRE Hotels’ Americas Research anticipates the addition of roughly 101,000 guestrooms to the U.S. inventory during 2018—an increase of 2 percent year-over-year (YOY), and the largest increase of new rooms to enter the market since 2009.
CBRE asserts that 42 U.S. markets are expected to see a supply increase greater than 2 percent, a 0.6 percent decline in occupancy, and a 2.4 percent jump in ADR. Markets forecasted to see a supply change of less than 2 percent will likely report increases in both occupancy and ADR by 0.2 and 3.4 percent, respectively. The national average occupancy is expected to dip slightly from 65.9 percent to 65.8 percent YOY, and remain that way until another decline in 2020.
“Beyond 2018, we are expecting the pace of new hotel construction to hover around the 2 percent mark, but the number of net new rooms per year will taper. This is the natural progression after years of slight occupancy declines and decelerating ADR,” says CBRE senior managing director R. Mark Woodworth. “Strong national occupancy levels and decelerating changes in ADR will characterize U.S. lodging performance over the next few years. It is important to pay attention to local market conditions, especially in those areas where there will be significant gains in supply.”
The final three months of 2017 saw performance increase nearly 1 percent. Over the course of last year, ADR grew by 2.1 percent and RevPAR leapt 3 percent. ADR in particular is slated to grow by 2.6 percent in 2018, then see a decline of 2 percent by 2019 and 1.7 percent by 2020.
“Much of the increase in lodging demand during the latter part of 2017 can be attributed to the impact of Hurricanes Harvey and Irma,” says John B. Corgel, professor of real estate at the Cornell University School of Hotel Administration and senior advisor to CBRE. “An influx of displaced residents, insurance adjusters, repair personnel, and other disaster responders caused significant increases in demand in several Florida and Texas markets. Given the unique circumstances that helped bolster performance in 2017, it is unlikely this level of demand growth will be repeated in 2018.”
