The hotel market is poised for a healthy year. Coming off a relatively strong 2017, the hotel market is expected to see strong demand, fueled by strong employment and low new construction. Hotel rates, however, are going to continue to be anemic. Carter Wilson, VP of consulting and analytics at STR, expects to see 5% rate growth this year, which he knows will “be a disappointment” to some. Still, the hotel market is healthy, and Wilson says that he remains bullish.

“The hotel economy is tied to the overall economy, and the overall economy is firing on all cylinders right now,” Wilson explains. “We effectively are at full employment and we have strong consumer confidence and estimates keep increasing. That all bodes well for hotel demand. We had strong demand growth in the third and fourth quarter last year. Rate growth, however, seems to remain anemic, and this year, we expect to see 5% rate growth.”

While he has a positive outlook on the market, there are areas that is watching closely. “We are keeping our eyes on potential interest rate hikes, and there should be a couple of them this year,” says Wilson. “That actually should cool down a potentially overheating economy more than anything else. We are also keeping our eye on a weakening dollar. It has been strong for so long, and it will be interesting to see what kind of net-bound tourism we might see from a weakening dollar. New supply isn't a concern for the hotel market, and new construction is continuing to trend down. We are bullish on demand for 2018, and we think the strong growth should really compensate for what ended up being tough third and fourth quarter comps.”

He admits that the hotel market is very market specific. This year, he is pointing investors to San Francisco. “I am bullish on San Francisco. Coming off of a soft 2017, I think that we are looking at upside. We have just modified the Airbnb market, so I believe that will provide upside as well,” he explains. At the end of the year, he also expects Minneapolis to top the list of the best performing markets. “In the short-term, I am bullish on Minneapolis,” adds Wilson. “It is a mid-sized market, and I think that the growth from the Super Bowl is going to carry throughout the year.”

Instant Insights /

Hotel Rates Poised For Low Growth

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