This great article from Hotel News Now offers some insightful predictions from industry leaders on where in the industry is headed in 2018.

Published by: Bryan Wroten/Hotel News Now

Published date: January 2018

Last year turned out to be a better year for the U.S. hotel industry than previously thought, thanks generally to a stronger economy, lower unemployment and higher consumer confidence. That has left hoteliers to wonder now whether the industry will have a repeat performance in 2018.

To gauge where the U.S. hotel industry is headed, Hotel News Now requested first-quarter forecasts for 2018 from STR (parent company of HNN), PwC and CBRE. We then asked their experts to provide some guidance on what those forecasts mean. The sources are optimistic about the hotel industry, but that optimism is tempered by the challenges the industry faces going forward.

Jan Freitag, SVP lodging insights, STR
“STR is projecting a continued healthy demand environment for the U.S. hotel industry, setting another room demand record for the most rooms sold—ever. Supply growth will tick up to outpace the demand increase, and we expect occupancy to slightly decline in 2018.

“The demand increase in Q1 will still be positively impacted by the hurricane demand surge we experienced in October 2017. This one-time event will mask all sorts of sins in the underlying demand numbers, and later on in the year, once the effect dissipates, we will have a clearer look at the underlying data.

“Supply increases will be more pronounced in the top 25 markets, and we expect that those markets will again see the brunt of new supply openings as the year starts. Good news is, however, that the number of rooms in construction is not growing rapidly anymore, which bodes well for national occupancy levels going forward.

“Our forecast takes into consideration a change in the tax laws that should increase U.S. GDP growth and, with it, room demand. As occupancies continue to hover around all-time high levels, and hoteliers are more comfortable with the continued strong business environment, we expect further pricing power and ADR to increase well above the rate of inflation, which will make up all of the projected RevPAR growth.

“That all said, in this environment, cost control remains ever more important and in order to drive bottom-line increases, operators have to focus on controlling labor and distribution costs ever more carefully.”

Scott Berman, U.S. hospitality & leisure practice leader, PwC
“This year’s first quarter was a pleasant surprise. Some of the optimism you’re hearing about this year was really because it got off to a great start. The calendar is very important to Q1. Last year, Easter and Passover both fell in Q1. They do not this year. I am less optimistic about Q1 relative to 2017, but it will still be OK. What that says is Q2 will be better than Q1 more than likely.

“The industry is very concerned about inbound arrivals. (The U.S. Travel Association) came out with some very disturbing numbers on actual arrivals into the U.S. When you look at coastal markets, from Boston down to Miami and Seattle down to San Diego, that is going to have some influence on hotel performance.

“You wouldn’t judge it by occupancy, because occupancy is strong, but there’s no question that, whether it is the economies in other parts of the world … this is a headline story, and the U.S. Travel numbers need to be dissected closely. … The U.K. is dealing with the Brexit issue while the rest of Europe is bumping along. The Chinese are infinitely growing, but slowing down. Obviously the political climate is having an impact.”

Mark Woodworth, senior managing director, CBRE Hotels’ Americas Research
“CBRE Hotels’ Americas Research is forecasting U.S. RevPAR to increase by 3.7% in Q1 2018, equal to our forecast for RevPAR growth in Q4 2017. We see slightly greater ADR lift in Q1 2018 (+3.2%) than in Q4 2017 (+2.7%). The sustained, record occupancy levels are expected to finally boost pricing power as the domestic economy continues to expand, and business and consumer confidence further elevates. The Index of Leading Economic Indicators published by The Conference Board began increasing at an elevated rate since February 2017. Lodging demand typically responds six to eight months later. These are good signs for U.S hoteliers.

“Increasing home prices and the significant increases achieved in the stock market have contributed to a substantial enhancement of the wealth effect. This will continue to contribute to greater levels of leisure travel. Also, in select southern markets, the ongoing remediation of the damages brought by the hurricanes of 2017 will result in greater levels of rooms sold throughout most of the first quarter of the new year.”

To read the article on Hotel New Now, click here.