Will Hotel Rates Plateau in 2018?

Hotel occupancy rates are expected to keep in step with 2017 numbers, which were at an all-time high last year, according to Mark Woodworth, senior managing director at CBRE Hotels, who spoke at ALIS earlier this year. Strong demand fundamentals are driving occupancy rates up, and Woodworth expects the occupancy numbers in 2018 to remain is step with 2017 numbers. Overall, that is good news for the hotel industry—but there is a downside. Hotel room rates aren’t following the growth of demand.

“When you benchmark the end of 2017 and the forecast for this year and next year, all of the data for supply and demand looks very normal,” Woodworth says. “If we look at the occupancy, we continue to be well above the long-term average. “2017 was an all-time high record and we think that is going to be sustained. However, rates have been moving at a disappointing level. In 2017, it was the first time ever that we saw a real decline in average daily rate during a period where there was not a recession.”

While hotel demand is high, the anemic growth in room rental rates is keeping REVpar at a nominal 3% growth. Woodworth predicted, nearly exactly, that REVpar growth in 2017 would hit 3%. “A year ago, we predicted that REVpar growth would be up by 3%, and we got that right on the nose,” he says. “We got there by being wrong in two areas. Demand has continued to stay very much on the positive side, which isn’t a surprise based on the economic fundamentals.”