CBRE forecasts enhanced RevPAR growth in 2023 despite economic headwinds
ADR is still expected to rise 4.2 percent, driving a similar increase in RevPAR
By By Rachael Rothman and Matt MowellFeb 02, 2023
DESPITE PROJECTIONS OF persistent inflation and a moderate economic recession, CBRE’s November 2022 Hotel Horizons forecast calls for a 5.8 percent increase in RevPAR in 2023. This is up from CBRE’s previous forecast of a 5.6 percent increase in RevPAR for 2023.
Propelling CBRE’s increased outlook for RevPAR is an expected 4.2 percent rise in ADR, driven in part by the continuation of above long-run average inflation. For 2023, CBRE is forecasting the Consumer Price Index in the U.S. to increase by 3.5 percent year over year. Inflation continues to have a mixed impact on the hotel industry, bolstering top-line growth while pressuring margins.
Supply and Demand
Inflation is also impacting development activity. The combination of rising construction material costs, a tight labor market, and high interest rates will serve to keep supply growth over the next five years 40 percent lower than historical trends. Instead of construction, we expect cash flows in the near term to be focused on debt reductions, renovations and remodels given the backlog of Capex that built up during the pandemic.
Given its forecast for a 0.2 percent decline in 2023 gross domestic product, CBRE lowered its expectations for demand growth from 3.3 percent in their August 2022 forecasts to 2.9 percent in the November update. With the projected supply increase remaining at 1.2 percent for 2023, the net result is a reduction in CBRE’s occupancy growth estimate for the year to 1.6 percent, down from the 2 percent increase previously forecast. The lowering of occupancy expectations will somewhat offset the enhanced outlook for ADR growth.
It is worth noting that the 5.8 percent RevPAR growth forecast for 2023 is front-end loaded, particularly in the first quarter of the year given the easy comparisons created by the outbreak of the Omicron variant in early 2022. Our RevPAR forecast for the first quarter of 2023 calls for a 15.6 percent gain, followed by 2-4 percent growth over the balance of the year.
Chain Scales
By the end of 2023, CBRE forecasts all chain scales to have surpassed their respective 2019 RevPAR levels. Economy and midscale hotels recovered to 2019 levels in 2021. Closures, higher rents and displacements from shelters will continue to shift people from homes and apartments to lower-priced hotels offering weekly and monthly rates.
Luxury and upper-upscale properties have lagged in recovery because of their dependence on individual corporate and group demand. Hotels that operate in these segments will not achieve RevPAR recovery until the end of 2023.
Markets
CBRE prepares Hotel Horizons forecasts for 65 of the largest markets in the U.S. By year-end 2023, 53 of the 65 Horizons markets are expected to have reached, or surpassed, their 2019 RevPAR levels. That leaves 12 more to recover in 2024 or beyond. The majority of markets lagging in recovery are in northern California, the upper-Midwest, and along the northeast corridor from Washington, D.C. through New York.
At the other end of the spectrum, the leisure-centric destinations of Savannah, Miami, St. Petersburg and the Coachella Valley in California are forecast to exceed their 2019 RevPAR levels by more than 20 percent in 2023.
The Economy
CBRE’s Hotel Horizons forecasts are based on economic assumptions prepared by CBRE Econometric Advisors. As of October 2022, CBRE EA expected the following for the U.S. economy in 2023.
A Recession
CBRE EA anticipates that a moderate recession will last through the first half of 2023 for the following reasons:
The key trigger of this downturn is the Fed’s aggressive rate hikes delivering its intended effects.
Higher household debt costs are weighing on consumption of big-ticket items, such as housing and reportedly autos.
A strong USD will impede exports.
Higher corporate cost of capital is forcing firms to shelve expansion plans and layoff announcements are increasing. This will soften the labor market via a falling job openings rate in the near term, and the unemployment rate should increase to 5% by 2024.
Inflation
The pace of annual inflation likely peaked during the summer of 2022. Moving into autumn, easing commodity and consumer goods prices are weighing on CPI. The largest component of CPI—housing—is also peaking. Some monthly data points suggest that both rental and for-sale prices are falling. Nevertheless, the Fed remains vigilant about rising services costs and the prospect of embedded inflation. This should keep the Fed Funds Rate trending upward through mid-2023 and peaking north of 4.5 percent. Indeed, this outlook is predicated upon inflation decelerating to 3.5 percent by year-end 2023. It is entirely plausible that inflation could remain stubbornly high, which would trigger a stronger response from the Fed and a more painful recession.
It should be noted that the CBRE lodging forecasts presented in this article do not contemplate a global war, a pervasive recession or a more acute COVID variant.
In September, CBRE released a revised forecast for the second half of 2022.
Howard Johnson is marking its 100th anniversary with fried clam–shaped soaps.
The soaps pay homage to an iconic HoJo menu item.
Available at select hotels and for online purchase starting Oct. 3.
HOWARD JOHNSON BY Wyndham marks a century with one of its most famous menu items, the fried clam strip. The brand is introducing limited-edition HoJo’s Original Fried Clam Soap, available at select Howard Johnson hotels across the U.S. and for online purchase beginning Oct. 3.
Designed to resemble the original food item, the soaps are infused with lemon, sea salt and butter in a nod to the butter-soaked rolls that once accompanied the fried clams, according to a statement by Wyndham.
“Howard Johnson is a brand woven into America’s cultural fabric and beloved by millions for generations,” said Marissa Yoss, HoJo’s head of marketing. “As we celebrate 100 years, our limited-edition fried clam soap is a fun, nostalgic tribute to the brand’s storied past and a playful nod to the retro-modern, family-friendly spirit that continues defining our hotels today.”
For World Waffle Day celebrations, Comfort Hotels hosted a one-day Waffle Lounge in New York City on Aug. 21.
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House introduces AFA to boost franchise model and hotel operations.
The act establishes a joint employer standard.
AHLA backs the bill, urging swift adoption.
THE HOUSE Of Representatives introduced the American Franchise Act, aimed at supporting the U.S. franchising sector, including 36,000 franchised hotels and 3 million workers nationwide. The American Hotel & Lodging Association, backed the bill, urging swift adoption to boost the franchise model and clarify joint employer standards.
The AFA amends the Fair Labor Standards Act and the National Labor Relations Act, which since 2015 have created uncertainty for franchisors and franchisees, AHLA said in a statement.
Rep. Kevin Hern (R-Oklahoma) and Don Davis (D-North Carolina) introduced the AFA.
“Hotel franchising is a pathway to the American Dream for many entrepreneurs,” said Rosanna Maietta, AHLA president and CEO. “It is a proven win-win business model that enables partnerships between franchisees and franchisors. The American Franchise Act codifies a clear joint employer definition and is essential to protecting this framework.”
AFA aims to protect the franchise model, which has long enabled women and minority entrepreneurs to run their own businesses with support from larger brands, the statement said. It will clarify the employment relationship by establishing a joint employer standard that protects workers and preserves franchisee autonomy.
Mitch Patel, AHLA board chair and Vision Hospitality Group CEO, said that as a hotel franchisee, he has seen how the model enabled him and others to achieve the American Dream.
“Throughout my career, my hotel business has employed thousands of people who have built lifelong careers in our industry,” he said. “The American Franchise Act is essential to preserving this foundation. For the benefit of both employers and employees, we strongly encourage the swift passage of this critical legislation.”
"As one of the few franchisees in Congress, I understand how damaging an ever-changing joint-employer rule is to the franchise business model,” said Hern. “I'm pleased that we were able to come together in a bipartisan effort to create legislation that safeguards small businesses and individuals working to achieve the American Dream across the country."
Davis said changes to joint-employer rules have created prolonged uncertainty in the industry.
“The American Franchise Act aims to restore stability by clarifying that franchisors and franchisees operate as independent employers while safeguarding workers through established labor standards,” he said.
Separately, a petition for a referendum on Los Angeles’s “Olympic Wage” ordinance, which sets a $30 minimum wage for hospitality workers by the 2028 Games, fell short of signatures. The ordinance will take effect, raising hotel wages from $22.50 to $25 next year, $27.50 in 2027 and $30 in 2028.
Noble broke ground on StudioRes Mobile Alabama at McGowin Park.
The 10th StudioRes expands Noble’s long-term accommodations platform.
Noble recently acquired 16 WoodSpring Suites properties through two portfolio transactions.
NOBLE INVESTMENT GROUP broke ground on StudioRes Mobile Alabama at McGowin Park, a retail center in Mobile, Alabama. It is Noble’s 10th property under Marriott International’s extended stay StudioRes brand.
“Noble is institutionalizing one of the most resilient and undersupplied segments at the intersection of hospitality, mobility and how people stay,” said Shah. “We are scaling a branded platform to capture secular demand that creates stable cash flow and long-term value.”
In May, Noble acquired 16 WoodSpring Suites properties through two portfolio transactions, expanding its platform in branded long-term accommodations.
Noah Silverman, Marriott International’s global development officer, U.S. & Canada, said breaking ground on the 10th StudioRes with Noble reflects the brand’s growth and the companies’ three-decade partnership.
“With both companies’ expertise in long-term accommodations, Marriott’s distribution channels, and the power of our nearly 248 million Marriott Bonvoy members, we are confident StudioRes is uniquely positioned to generate customer demand at scale, drive performance and sustain long-term growth,” he said.
Meanwhile, Marriott has more than 50 signed StudioRes projects, about half under construction, the statement said. The first StudioRes opened in Fort Myers, Florida.
Hersha Hotels & Resorts sold The Boxer Boston to Eurostars Hotels.
The company acquired the property in 2012 for $12.6 million.
The property now sold for $23.6 million.
HERSHA HOTELS & RESORTS sold The Boxer Boston, an 80-room hotel in Boston’s West End, to Eurostars Hotels, part of Spain’s Grupo Hotusa. The company, which reportedly acquired the property in 2012 for $12.6 million, received $23.6 million for it.
The seven-story hotel, built in 1904, is near TD Garden, the Charles River Esplanade, One Congress, North Station and Massachusetts General Hospital, said JLL Hotels & Hospitality, which brokered the sale. It also has a fitness center.
Hersha Hotels & Resorts is part of the Hersha Group, founded in 1984 by Hasu Shah. Jay Shah serves as senior advisor and his brother Neil Shah is president and CEO.
JLL Managing Director Alan Suzuki, Senior Director Matthew Enright and Associate Emily Zhang represented the seller.
"The Boxer’s prime location at the crossroads of Boston's West End, North End and Downtown districts, combined with its strong cash flow and its unencumbered status regarding brand and management, made this an exceptionally attractive investment," said Suzuki. "Boston continues to demonstrate resilient lodging fundamentals driven by its diverse demand generators, including world-class educational institutions, medical facilities, corporate presence and convention and leisure attractions."
The property will become the Spanish hotel chain Eurostars’ fifth U.S. hotel, supporting the group’s North American expansion, the statement said.
Amancio López Seijas, president of Grupo Hotusa and Eurostars Hotels Co., said the addition of Eurostars’ The Boxer strengthens the company’s presence in key locations and promotes urban tourism.
Peachtree recognized by Inc. and the Atlanta Business Chronicle.
Named to the 2025 Inc. 5000 list for the third year.
Chronicle’s Pacesetter Awards recognize metro Atlanta’s fastest-growing companies.
PEACHTREE GROUP ENTERED the 2025 Inc. 5000 list for the third consecutive year. The company also won the Atlanta Business Chronicle Pacesetter Awards as one of the city’s fastest-growing private companies.
The Inc. 5000 list provides a data-driven look at independent businesses with sustained success nationwide, while the Business Chronicle’s Pacesetter Awards recognize metro Atlanta’s fastest-growing privately held companies, Peachtree said in a statement.
“We are in the business of identifying and capitalizing on mispriced risk, and in today’s environment of disruption and dislocation, that has created strong tailwinds for our growth,” said Greg Friedman, managing principal and CEO. “These recognitions validate our ability to execute in complex markets, and we see significant opportunity ahead as we continue to scale our platform.”
The Atlanta-based investment firm, led by Friedman; Jatin Desai, managing principal and CFO and Mitul Patel, principal, oversees a diversified portfolio of more than $8 billion.