Vacation News Miami Beach Edition | By Michael Gerrity | June 17, 2019.

Limited Demand Growth Can not Keep Pace with Modest Supply Increases

According to CBRE Hotels Research's latest report, the annual rate will increase to 2022.

Meanwhile, the annual rate of growth is projected to average approximately three-quarters of its respective long-run average. The result is declining occupancy forecasts for the 2020 and 2021.

According to the June 2019 edition of Horizons Hotel, CBRE Hotels Research projects US National Occupancy levels to remain flat in 2019 at 66.2 percent, then decline to 65.7 percent in 2020 and 64.6 percent in 2021. For context, US occupancy averaged 62.5 percent from 1988 through 2018, according to STR.

"Given the 10 consecutive years of occupancy expansion," said R. Mark Woodworth, Senior Managing Director of CBRE Hotels Research. "Despite the anticipated declines, the national occupancy level will be at least 200 basis points above the long-run average through 2023."

Explanation from the Economy

Changes in the demand for lodging and accommodations of the national economy. The CBRE Econometric Advisors is forecasting the US Gross Domestic Project (GDP) to decelerate from a 2.2 percent rise in 2019 to just 0.7 percent in 2020 and 1.4 percent in 2021. . Therefore, 2.0 percent in 2019, 1.1 percent in 2020 and only 0.1 percent in 2021.

Richard Barkham, Ph.D., CBRE's Global Chief Economist and Head of Americas Research, explains the company's outlook for 2019: "US economic growth in 2019 will be more moderate than in 2018, but it can still be considered good. alongside the US, global GDP growth numbers, and the US, consumer confidence remains high.

"The forecast economic slowdown is expected to be hit by a price point, exacerbated by equity market corrections, credit market problems and international geo-political factors," Barkham added. "Fortunately, the slowdown should be relatively mild and quick."

The percentages for the growth of growth are 2.7 percent, and 2.0 percent, respectively, for those two years. "Occupancy levels will once again surpass the 66.0 percent mark by 2023," Woodworth said.

Concentrated Supply

CBRE Hotels Research has focused on lowering inflection in the business cycle. "Oversupply has certainly been one of those factors," noted John B. (Jack) Corgel, Ph.D., professor of real estate at the Cornell University School of Hotel Administration and senior advisor at CBRE Hotels Research. "While forecasts for national supply growth from 2019 through 2022 ex the long-run average of 1.8 percent, the market is more likely to grow." experience a meaningful slowdown in performance. "

Half of the estimated 105,000 net new rooms are open to 2019 are in the 17 of the nation's major markets. Over the next four years, this number ranges from 23 to 32.

"The concentrated supply growth not only impacts occupancy, but average daily rate, in the markets with the highest concentrations of new supply, ADR growth will remain below the inflation rate of 2019 through 2022. Conversely, the markets with ADR growth in inflation is one of the most important factors in the growth of this market, and Woodworth noted.

Maintain, Not Growth

The combination of declining occupancy and ADR growth rates RevPAR gains for the next few years. CBRE Hotels Research forecasts National US RevPAR growth rates of 2.0 percent in 2019 and 1.8 percent in 2020. In response to the 2020 economic slowdown, the national RevPAR is projected to decline by 0.5 percent in 2021, the first such decline. price followed by a 1.3 percent rise in RevPAR, followed by a very strong increase of 3.8 percent in 2023.

"Certainly, these forecasts are relatively recent, but we continue to believe that occupancy, profit margins and operating cash flows are at extremely high levels. Revenue Management, channel management, property maintenance and expense controls, they can continue to earn strong returns and preserve value while riding the slowdown, "Woodworth concluded.