DALLAS—CBRE is raising its forecast for hotel performance on the heels of industry gains in Q4 2022 and the expectation of slightly positive GDP growth in 2023.
CBRE has revised its forecast for 2023 revenue per available room (RevPAR) to $97.46, up 5.8 percent year-over-year, and an increase of $0.43 from its previous forecast. The positive revision is predicated on a roughly 30-basis-point increase in expected occupancy compared to the previous forecast issued in November 2022. There was no change to the average daily rate (ADR) forecast of $150.21.
CBRE’s baseline-scenario forecasts anticipate a 0.2 percent increase for full-year 2023 GDP growth and inflation of 4.7 percent. Given the strong correlation between GDP and RevPAR growth, changes in the economic outlook will have a direct impact on lodging industry results.
“The easing of travel restrictions in Japan and China, combined with continued improvements in group and independent business travel, should drive RevPAR to record levels in 2023 under our base-case scenario,” said Rachael Rothman, CBRE’s head of hotel research and data analytics.
The U.S. economy grew at an annualized rate of 2.9 percent in Q4 2022, the second consecutive quarter of positive GDP growth. The uptick in economic growth led to Q4 record U.S. RevPAR of $89.27, up 16.2 percent year-over-year from Q4 2021. RevPAR growth was driven by a 12.1 percent increase in ADR and a 3.6 percent increase in occupancy year-over-year. Strength in the quarter was attributable to continued improvement in group business, inbound international travel, and an uptick in traditional transient business demand.
CBRE expects most 2023 RevPAR growth to occur early in the year, particularly in the first quarter. The new RevPAR forecast calls for 16.2 percent growth in Q1 2023, followed by increases in the 1.5 percent to 4.5 percent range over the balance of the year.
“Inflation continues to have a mixed impact on the hotel industry, bolstering top-line growth, while pressuring margins and increasing the cost of renovations and development,” said Michael Nhu, CBRE’s global hotels economist. “The combination of inflationary pressures and higher interest rates are leading to slower hotel supply growth, and further strengthening the pricing power of existing hotels.”
CBRE forecasts that hotel supply will increase at a 1.0 percent compound annual growth rate over the next five years, below the industry’s 1.7 percent long-term historical average.