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STR lowers RevPAR forecast for US hotels in 2019

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STR lowers RevPAR forecast for US hotels in 2019

STR lowered its forecast for revenue growth in the U.S. hotel industry in 2019, after average daily rates were weaker than expected in the first quarter of the year.

The data firm now projects growth in revenue per available room of 2.0% for 2019 — down from an earlier projection, in February, of 2.3% growth. For 2020, STR is predicting RevPAR growth of 1.9%.

The first quarter of the year produced worse-than-expected rates, though indicators point to better performance for the remainder of the year, STR's president and CEO, Amanda Hite, said in a news release. Hite said economic momentum is slowing, but added that consumer confidence and low unemployment should aid hotel performance, while forward-looking U.S. air-travel bookings remain steady. Demand remains high, and occupancy has been better than expected, Hite said.

New construction activity has risen for seven straight months overall, and has hurt hotels' performance in major markets and in the select-service segment, Hite said. Meanwhile, labor costs have outgrown revenue for two consecutive years, putting pressure on profit margins.

RevPAR, a key performance metric in the hotel industry, grew 2.9% in both 2017 and 2018, the lowest annual growth for U.S. hotels since 2009.

For the full year 2019, STR expects U.S. occupancy growth of 0.1% and ADR gain of 1.9%, with a majority of the top 25 U.S. markets posting RevPAR growth in the range of 1% to 3%. The firm expects the highest growth in Atlanta; San Francisco/San Mateo, Calif.; and Tampa/St. Petersburg, Fla.; and the lowest growth in Houston; Miami/Hialeah, Fla.; Minneapolis/St. Paul, Minn.; and Washington, D.C.

For 2020, STR forecasts a decline in occupancy of 0.2% and a gain in ADR of 2.2%. A decline in occupancy would be the first in the U.S. hotel business since 2009.