CBRE Hotels;

CBRE U.S. Hotels State of the Union November 2023 Edition

Key Takeaways:

  • Travel Trends

    TSA throughput continues to be above 2019 levels, up 11.9% in October MTD.
    The number of air passengers is above pre-pandemic levels, but this hasn’t translated into a full recovery in lodging demand. Travelers may be traveling abroad, staying in alternative accommodations, or taking cruises.

    Short-term rentals continue to gain market share.
    Despite weakening hotel demand, consumers are spending on travel, as STR demand grew 12.2% year-over-year and supply increased 13.5%. Rising interest rates could mute short-term rental supply growth going forward.

    Outbound U.S. travelers outpaced inbound international visitors.
    Inbound international travel continued to lag outbound travel, reaching 84% of 2019 in September. The gap between inbound and outbound travel now stands at 33.9 percentage points.

  • Hotel Trends

    September was the third month in a row of RevPAR contraction, -0.1%.
    RevPAR declines were driven by a 1.5% decrease in occupancy offset by a modest 1.4% increase in ADR. Lower-priced hotels continued to post RevPAR declines during the month.

    Margins declined for the sixth month in a row in August.
     Margins declined 2.1 percentage points in August, and gross operating profit dollars declined 4.4% year-over-year.
     
    Q3 Brand.com demand was 11.8% above 2019, outperforming OTAs.
    Consistent with the underperformance of Independent hotels, Brand.com demand outpaced OTAs, which was 2.5% below 2019 levels.

  • Food for Thought

    The consumer continues to show strength.
    With wage growth outpacing inflation and excess savings still in the bank, consumers continue to benefit from low rates on outstanding mortgages and low unemployment rates.

    CBRE expects the Fed to begin to cut rates in 1Q24.
    CBRE expects interest rates to remain elevated for longer, with the Fed beginning to cut rates in 1Q24. Rates are predicted to remain above 5% until 3Q24 one quarter later than previous forecasts.

    Higher interest rates are impacting loan origination and size.
    Loan originations slowed in October to 5 from 10 a year ago, with average loan origination dropping from $0.3 billion to $0.1 billion. Hotel CMBS spreads were 40 bps wider than a year ago at 288 bps, and rates were 7.7%.

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