Hotel Seller’s Market Softens

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Hotel Sellers MarketNew supply in some major U.S. markets may give planners more leverage, but for the most part 2020 and 2021 will be a continuation of the strong hotel seller’s market, in which the U.S. hotel market has had record performance and profits. Here’s a look at key metrics in the STR and Tourism Economics’ recent forecast, as well as data on the five U.S. cities with the largest hotel construction pipelines at the close of 2019.

According to STR and Tourism Economics’ forecast, presented last month at the American Lodging Investment Summit in Los Angeles, revenue per available room (RevPar) will not grow in 2020 and will increase just .05 percent in 2021— the first no-growth projection for this key metric since 2009 thus leading to a continued hotel seller’s market.

STR president Amanda Hite, speaking at the summit, said 2019 was the worst year since the recession for RevPar growth, coming in at 0.9 percent after nine years of increases of 3 percent or higher. RevPar growth may be slowing, but that’s after record highs over the last few years.

Other data points from STR and Tourism Economics: Supply growth for this year and next is forecast to exceed demand, and average daily rate (ADR) is expected to grow but at just 0.3 percent for 2020 and 0.6 percent for 2021. Occupancy is expected to decrease by 0.3 percent this year and 0.1 percent in 2021.

Looking at Supply

Several companies at the Americas Lodging Investment Summit announced record 2019 growth. Marriott said it signed a record number of rooms last year, bringing its total pipeline to 515,000 rooms. Hilton set a new construction start record of 87,000 rooms.

Moreover, Lodging Econometrics reports that the number of hotels under construction in the U.S. is at an all-time high with 1,768 projects and 237,362 rooms. According to the research firm, the five U.S. markets with the largest hotel construction pipelines (as of the close of 2019) are New York (107 projects/17,268 rooms), Dallas (47 projects/5,894 rooms), Los Angeles (46 projects/7,064 rooms), Atlanta (46 projects/5,643 rooms), and Nashville (37 projects/6,634 rooms).

These five markets collectively account for 16 percent of the total number of projects currently under construction across the country.

As for new projects announced but not yet under construction, in the fourth quarter of 2019 Denver had the highest number with 19 projects/2,372 rooms. Following Denver, were Atlanta with 18 projects/2,613 rooms, Phoenix with 14 projects/1,907 rooms, Orlando with 14 projects/1,855 rooms, and Dallas with 13 projects/1,467 rooms.

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