The 2017 outlook for U.S. hotels remains mixed, with near-record occupancy levels projected while ADR are expected to continue leveling off. According to December 2016 Hotel Horizons forecast report, CBRE Hotels’ Americas Research is projecting the U.S. lodging industry will achieve an annual occupancy rate of 65.3 percent in 2017, just shy of the 65.4 percent all-time record occupancy level expected for 2016.
CBRE is also forecasting an ADR increase of 3.3 percent next year. While this represents a change of 1.7 percent, ADR growth has been falling since 2014 and is expected to weaken through 2019.
“Conventional wisdom says that at such high occupancy levels, hoteliers should have the leverage to implement strong price increases. However, like for much of 2016, you need to throw conventional wisdom out the window,” says R. Mark Woodworth, senior managing director of CBRE Hotels’ Americas Research. “Complicating matters in 2016 was the elevated level of economic and political uncertainty felt by the business community and consumers. Without knowing the outcome of the election, the direction of the Fed with regards to interest rates and the growing strength of the dollar, we sensed that companies and individuals held back on their commitments to spend more on meetings and travel.”
Northern California markets including Sacramento and Oakland, along with Washington, DC and Tampa, Florida are expected to lead the nation in ADR gains of more than 6 percent during 2017. In addition, economic factors including increases in retail sales, auto sales, building materials, and health and beauty product sales bodes well for the travel industry, indication that people are willing to spend on themselves.
Slight declines in occupancy combined with minimal real gains in ADR are expected through 2020, according to CBRE. “We are encouraged by the positive outlook for lodging demand and resulting high levels of occupancy. While flat performance sounds disappointing, the strong underpinnings supporting continued growth in travel will prevent an outright fall from the peak,” Woodworth concluded.
