IRVINE, CA—Ten-X has released its quarterly hotel monitor report. The report highlights U.S. hotels’ revenue growth in Q1, plus hot buy and sell domestic markets and what’s ahead for the industry:
U.S. Hotel Markets
Room rate growth is pushing hotel revenues higher despite a slowdown in occupancy growth amid a burgeoning supply pipeline.
- Total U.S. hotel revenue is up 3.5% year-over-year at $13.1 trillion in Q1
- 3.2% annual wage growth
- Deal volume fell to $6.7 billion in Q1, down 36% from a year ago (the decline was most stark in the full-service sector where deal volume measured $3.7 billion in Q1, a decline of 68% from the quarter prior and 39% from a year ago)
- Occupancies peaked at 72.5% in 2015, and will drop to 67.2% amid 2019-2020 stress test, before returning to 71.1% by 2022
Top Five Buy Markets:
- Palm Beach, FL
- Orlando, FL
- Tampa, FL
Top Five Sell Markets:
- Kansas City, MO-KS
- Long Island, NY
Tex-X projects room demand will fall 4% this year, an improvement from its prior projection of 5%. It will then bounce back lightly in 2020, though at a milder face than the previous forecast. Ten-X expects supply to expand at just under 2% this year, down slightly from the pace seen in years prior, with further decelerations in supply additions ahead. As a result, occupancies will fall to above 67% this year and plateau there next year.
As demand recovers in 2021-22 and room additions remain minimal, occupancies will rise back up, eventually reaching 71% in 2022, Ten-X reported. Room rate has gotten slightly more negative in the near term, however, as performance has been weak in recent quarters despite the ongoing economic cycle.
Ten-X expects room rates to contract just under 2% this year, before falling nearly 5% in 2020. Room rate growth will then bounce back with an average annual growth of more than 4% in 2021-22. Current projections show RevPAR falling the same 6.3% per year in 2019-20. RevPAR will then see growth of 7% per year in 2021-22 as occupancies and room rates rebound.