CBRE: Higher rates, stronger demand to fuel 2024 RevPAR growth

U.S. HOTEL REVPAR is expected to grow steadily in 2024, driven by improving group business, inbound international travel, and traditional transient business demand, according to CBRE. This follows a strong performance in 2023 that muted the new forecast in some areas.

The research firm forecasted a 3 percent increase in RevPAR growth in 2024, with occupancy improving by 45 basis points and ADR increasing by 2.3 percent. It indicates ongoing recovery of the lodging industry, with RevPAR in 2024 expected to surpass 2019 levels by 13.2 percent, CBRE Hotels said in a statement.

CBRE's baseline forecast expects 1.6 percent GDP growth and 2.5 percent average inflation in 2024. Given the strong correlation between GDP and RevPAR growth, the economy's strength will directly impact the lodging industry's performance, the statement said.

“We expect RevPAR growth to be slower in the first quarter due to last year’s strong performance, but to reach its peak in the third quarter driven by the influx of inbound international travelers during the busy summer season,” said Rachael Rothman, CBRE’s head of hotel research and data analytics. “Urban and airport locations should particularly benefit from group and inbound international travel, as well as the normalization of leisure travel.”

The U.S. economy exceeded expectations with a 2.5 percent GDP growth rate in 2023, resulting in record RevPAR of $95.84, a 3.2 percent year-over-year increase, CBRE said. RevPAR growth was driven by a 2.7 percent increase in ADR and a 0.31 percentage point increase in occupancy, fueled by group business, inbound international travel, and an uptick in traditional transient business demand.

“Despite the upside surprises in employment and GDP growth in 2023, lodging demand fell short of initial expectations due to the popularity of lodging alternatives like cruises and short-term rentals,” said Michael Nhu, CBRE’s senior economist/head of global hotels forecasting.

CBRE expects limited supply growth in the medium term due to elevated financing and construction costs, as well as the scarcity of properties available below replacement costs, the statement said. For 2024, it anticipates supply growth of just under 1 percent, with hotel supply projected to maintain a compound annual growth rate of 0.87 percent over the next three years.

According to the American Hotel & Lodging Association's 2024 State of the Hotel Industry report, the U.S. hotel industry is robust as it enters 2024, with average hotel occupancy expected to approach 63.6 percent.