On the heels of first-quarter U.S. hotel rate gains, CBRE Hotels Research again has raised its 2023 revenue forecast due to “stronger-than-expected demand” and “modest” supply growth driving up occupancy, the company announced Thursday.
CBRE’s revised 2023 forecast projects U.S. revenue per available room to increase 6 percent year over year to $97.89, which is up $0.43 from its previous prediction.
The lifted outlook does not extend to average daily rate, which CBRE now expects will increase by 3.7 percent year over year in 2023—down from its previous forecast of 4.2 percent—due to expectations of “slightly lower inflation” and a “bigger mix of group travel and shoulder-period demand” typically sold at a lower rate, CBRE authors wrote in the report.
CBRE projects 0.8 percent average gross domestic product growth for 2023, which “will directly impact lodging industry performance.”
The U.S. economy grew 1.1 percent in Q1, according to CBRE, which led to a record U.S. RevPAR of $88.33, up 15.5 percent year over year. First-quarter average daily rates increased 9.6 percent year over year, and occupancy was up 3.1 percent. CBRE projects Q1 to be the “high point” of the year in terms of RevPAR growth, the company said.
CBRE attributed the strong first-quarter results to “continued improvement in group business, inbound international travel, and an uptick in traditional transient business demand.”
“We are already starting to see signs that the easing of travel restrictions in Japan and China, combined with continued improvements in group and independent business demand, are bolstering demand heading into the heavy summer travel season,” CBRE head of hotel research and data analytics Rachael Rothman said in the report.
Additionally, the company expects “travel-specific tailwinds” and “employment growth and wage increases” will make for another record RevPAR year, CBRE senior economist and head of global hotels forecasting Michael Nhu said in the report. However, growth during the next several months is expected to decelerate to 4 percent to 5 percent year over year, and ultimately to 2 percent to 3 percent by Q4.
CBRE forecasts hotel inventory will increase slightly but remain below the industry’s long-term historical average.
“The combination of inflationary pressures and higher interest rates are leading to slower hotel supply growth and further strengthening the pricing power of existing hotels,” Nhu added in the report.
CBRE previously revised its 2023 outlook following a positive Q4, the company announced in March.
