This article is republished with permission from TreppTalk.
The U.S. hotel market has experienced supercharged growth over the past five years, but it is looking at a substantial slowdown as a result of the increase in the supply of rooms.
Portsmouth, New Hampshire–based Lodging Econometrics reports that developers were expected to bring 841 hotels with 95,346 rooms online throughout the United States last year. This year, that expectation increases to 1,056 properties with 118,638 rooms, which would just about match the historic average. But that is enough to squeeze operators’ ability to keep occupancy at elevated levels.
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RLJ Lodging, which owns 122 full-service hotels with 20,100 rooms, recently said that it expects occupancy at its properties to decline this year. Still, the company anticipates revenue per available room (RevPAR, which combines occupancy with room rate) to increase modestly.
Overall, RevPAR has grown by 5.7 percent annually over the past five years. The projected growth in supply is expected to cut that sharply, with CBRE Hotels forecasting growth of 2.2 percent annually for the next five years. That is in line with STR’s projection of 2.5 percent RevPAR growth this year and 2.6 percent next year.
The growth in operating fundamentals that high-priced properties have enjoyed is slated to come to an end, however. Going forward, economy properties are expected to be growth leaders, with CBRE projecting a 2.8 percent growth in the subsector’s RevPAR in the coming years.
Last year, the national occupancy rate improved by 10 basis points to 65.5 percent, and average daily rates increased by 3.1 percent to $123.97, resulting in a 3.2 percent increase in RevPAR to $81.19.
* TREPP-i Survey Loan Spreads levels are based on a survey of balance sheet lenders. For more information, visit Trepp.com.
