STR and Tourism Economics lifted year-over-year growth projections for average daily rate (ADR) and revenue per available room (RevPAR) in the final U.S. hotel forecast revision of 2023.
For 2023, growth in RevPAR was raised by 0.3 percentage points, due to a 0.6ppt lift in ADR growth. Recent RevPAR trends demonstrate that rate continues to be the primary driver of performance. Occupancy was downgraded slightly (by 0.2ppts). For 2024, the growth projections for each of the key performance metrics remained flat from the previous forecast due to the above long-term average trends beginning to stabilize.
“Our latest projections reflect the continued buoyancy of travelers, as room rates outperformed our previous forecast, which built in a mild recession,” said Amanda Hite, STR president. “As a result, we have raised RevPAR for the remainder of 2023, with risks on the upside. Looking ahead to the new year, we expect to see continued growth in RevPAR. The latest economic outlook calls for a stalling economy with growth well below the levels seen toward the end of the pandemic. Despite the potential dip, we see strong traveler fundamentals, including low unemployment among college-educated individuals, an increased volume of households above $100k in income, a rise in real personal disposable income, and a somewhat stable corporate environment. The projected increase in ADR will result in higher TRevPAR, which combined with less spend on labor, lifts our expectation for GOP as well. The gap in hospitality employment levels coupled with increased operational efficiencies brought down our labor cost forecast.”
“Decelerating factors, including higher interest rates, more restrictive lending, tighter fiscal policy, and weakened household finances will lead consumers to rein in spending and firms to cut back on hiring and investment, likely causing the economy to skirt with recession,” said Aran Ryan, director of industry studies at Tourism Economics. “Travel sector improvements, including stronger group activity and returning international visitors, will help offset economic factors, supporting still-solid RevPAR gains.”
