Hospitality Midwest

A hotel crash? Nope. A slowdown? Maybe

A hotel crash nope slowdown maybe,ph01

The hotel sector across the country isn’t due for a big fall, not by any stretch. But new research from CBRE does suggest that it might be more challenging in the coming year for hotel operators to grow their profits from where they stand today.

Why? In its September 2019 Hotel Horizons Forecast, CBRE predicts that the hotel sector will see revenues increasing by about 1 percent in 2019 and 2020. The fact that revenues are predicted to rise is a positive. But CBRE points out that hotel operators would have to keep the growth of their expenses under 2 percent if they expect to achieve any real gains in gross operating profits.

That’s no easy task. CBRE points out that hotel expenses have averaged annual growth of 4 percent. At the same time, the labor market is tight, meaning that owners might have to pay more to attract employees. That combination will make profit growth a tough task in 2019 and 2020, CBRE’s hotel forecast says.

Still, CBRE had a mostly positive outlook on the near future of the hospitality sector. R. Mark Woodworth, senior managing director of CBRE Hotels Research, said that revenue per available room — better known as RevPAR – will grow from now to 2022. But this will be slow gorwth, not a boom, with CBRE predicting RevPAR growth of 0.8 percent to 1.9 percent during this time.

CBRE also predicts that demand for hotel rooms will level off during the second half of 2019. That’s not unexpected. During the first half of this year, demand for hotel rooms rose by 2.1 percent. CBRE says that demand will still increase in the second half of 2019, just at a slower rate of 1.4 percent. Because of this, CBRE is predicting that the national hotel occupancy level will decline by 0.2 percent from 2018 to 2019.

This doesn’t mean, though, that hotel owners will start dropping their average room rates. CBRE predicts that the average daily rate, or ADR, that hotels charge will increase by 1.1 percent throughout the rest of 2019.

CBRE is predicting that ADR will grow by 2 percent in 2020. For 2020, CBRE is predicting a RevPAR growth rate of 1.2 percent. For 2021, the firm is predicting a RevPAR gain of 0.8 percent.