Despite facing challenges from subdued summer demand and a sluggish third quarter, US hotel performance is expected to reaccelerate in the fourth quarter and extend momentum into 2025, according to CBRE’s latest forecast.

CBRE now forecasts a 0.5% increase in revenue per available room (RevPAR) growth for 2024, down from the previously estimated 1.2% in August. This revision reflects a 40-basis-point (bps) decrease in expected occupancy compared with the prior forecast, with occupancy anticipated to decline by 30 bps year over year. The average daily rate (ADR) is expected to increase by 0.7%, a reduction of 40 bps from earlier projections. RevPAR growth is expected to reaccelerate beginning in the fourth quarter of 2024, supported by recent interest rate cuts, easing inflation and rising stock market trends.

Rachael Rothman, head of hotel research and data analytics, said US hotel performance was softer than expected during the summer months, partly due to Americans traveling overseas in record numbers. At the same time, she said, the slow recovery in inbound international travel has created an imbalance in US leisure demand, Despite this, said Rothman, continued improvements in group and business travel served as “relative bright spots” in the third quarter.

In the third quarter of 2024, hotel demand declined 0.1% year over year, coupled with a 0.6% increase in supply, resulting in an approximately 0.8% decline in occupancy. Modest ADR growth of 0.6% fell short of CBRE’s previous expectation of 1.6%, leading to a 0.2% decrease in RevPAR for the quarter.

CBRE forecasts a compound annual growth in supply of 1% over the next five years, below the industry’s long-term historical average of 1.6%. The forecast includes GDP growth of 2.6% and average inflation of 2.9% for 2024. The lodging industry’s performance is closely linked to economic strength, said the report, as there is typically a strong correlation between GDP growth and RevPAR.

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