Might 2024 Lodge Business Outlook: Brilliant Spots and Challenges

Blended messages abound lately, comprising some vivid spots, some not so vivid spots, and a few challenges. With no coherent theme, the best problem could also be creating a forecast for the trade as a complete. However we’re undaunted and herewith current our present expectations for the U.S. lodging trade.

The current successive will increase in GDP, decrease inflation ranges, and continued robust job development paint a optimistic image of the U.S. economic system, however ongoing worldwide conflicts, the pending election, and uneven financial metrics have resulted in an absence of total readability. The specter of a recession stays, though a lot diminished from the considerations that characterised a lot of 2023.

The lodging trade is equally challenged by combined messages. A overview of STR’s month-to-month occupancy information for the U.S. signifies that the trade skilled a full twelve months of modest occupancy declines starting in April 2023 and lengthening by way of March 2024. Information for April 2024 was optimistic, however the shift of the Easter vacation from April to March makes it troublesome to interpret these outcomes. Was the 2023/24 twelve-month development a one-year correction? Or is it symptomatic of a longer-term adverse development? The notable variation in outcomes amongst property sorts, areas, and demand segments is logical—and in keeping with the post-pandemic interval to this point—however additional obfuscates the problem.
 
The group demand section is presently one of many brightest lights of the lodging trade, led by robust conference tempo and reserving exercise. The company group sector, notably small company conferences and occasions, additionally continues to develop. Enterprise journey is a optimistic issue, too, as return-to-office traits proceed and negotiated charges have elevated.
 
The present gradual tempo of provide development can also be favorable for present resorts. The trade is now reaping the advantages of the excessive development prices and the restricted availability and excessive value of financing which have severely constrained new development begins over the previous a number of years. In consequence, most trade members anticipate provide development to be round 1% this yr and stay muted for the following a number of years. Nonetheless, the trade has discovered to acknowledge these circumstances as alternatives. Thus, HVS expects provide to develop extra shortly than present traits recommend. Some markets are additionally benefiting from elevated restrictions on short-term leases, which reduces competitors from these sources. Nonetheless, the short-term-rental sector continues to have an effect on many markets, notably as vacationers search lodging options that could be perceived as a greater worth.
 
Supported by the above-noted components, many city markets are reporting optimistic leads to each occupancy and ADR. Leisure markets are additionally displaying optimistic traits, however bear watching by way of the height summer time season, which was considerably undermined in 2023 by broader considerations concerning the economic system. An imbalance in worldwide journey was additionally an element final yr, as outbound U.S. vacationers outpaced inbound leisure guests. The inbound statistics are displaying some enchancment however proceed to be impaired by the robust greenback. And the resurgence of the cruise trade is a aggressive issue that might additionally constrain lodging demand.
 
Whereas the tempo of inflation seems to be slowing, room charges stay elevated in comparison with historic ranges, placing elevated stress on disposable incomes. The weak outcomes reported by the economic system and midscale resort sectors mirror these traits, as properties in these classes might be notably delicate to broader financial pressures.
 
Our newest forecasts are offered beneath.

Forecast of Lodging Metrics

Supply: STR (Historic), HVS (Forecast)

Total, the outlook is modestly optimistic, with constrained provide development as essentially the most influential issue. Persistent softness in demand development could undermine yield administration and will immediate some warning in pricing. Nonetheless, ADR development is anticipated to stay optimistic in 2024, supported by continued development within the higher-priced demand segments. In consequence, RevPAR just isn’t anticipated to maintain tempo with inflation in 2024 however ought to surpass inflation within the following three years.

About Anne R. Lloyd-Jones

Anne R. Lloyd-Jones, MAI, CRE, is the Director of Consulting & Valuation Providers, Nationwide Observe Chief at HVS, the premier international hospitality consulting agency. Since becoming a member of HVS in 1982, Anne has offered consulting and appraisal companies for over 5,000 resorts. Anne’s explicit areas of experience embody market research, feasibility analyses, and value determinations. She can also be an knowledgeable within the valuation of administration and franchise corporations, in addition to manufacturers. Her expertise consists of a variety of property sorts, together with spas and convention facilities. She has appeared as an knowledgeable witness on quite a few events, offering testimony and litigation help on issues involving chapter proceedings, civil litigation, and arbitration. For additional info, please contact Anne at +1 (914) 772-1570 or ALloyd-Jones@hvs.com.