Strong Demand Causes CBRE to Revise Hotel Forecasts

NEW YORK CITY—CBRE Hotels’ Americas Research has looked over the numbers and believes that better than expected performance in the first quarter will help fuel further gains in the national and New York City lodging sectors.

The commercial brokerage firm reports that it has enhanced its forecasts for hotel performance nationwide and in New York City. According to Smith Travel Research, U.S. hotels had a 3.5% increase in revenue per available room (RevPAR) during the first quarter of 2018, exceeding the 2.5% RevPAR gain expected for the period.

Based on those better than expected results, CBRE now is forecasting a 2.8% annual increase in RevPAR for U.S. hotels in 2018, a 0.3-percentage-point enhancement over the 2.5% mark published in CBRE’s March 2018 Hotel Horizons report.

New York City’s hotel sector also had a strong first quarter and those results are also prompting CBRE to revise upward its NYC hotel growth forecast.

CBRE is now projecting a RevPAR gain of 1.8% for NYC hotels in 2018. Most of that growth is coming from increased average daily rates (ADR), which are forecast to increase 1.5% overall this year after declining slowly since 2015.

“RevPAR in the first quarter grew the fastest in five years at 7.1%, reflecting equal parts rate growth and occupancy increase. Following the strong demand growth of the first quarter of 2018, our 2018 RevPAR forecast has been revised upwards from our prior estimate,” says New York-based Mark VanStekelenburg, managing director of CBRE Hotels. “New York City remains one of the healthiest hotel markets in the country, given its stature as a world destination and the constant demand for traditional hotel rooms that comes with that distinction,”

Hotel occupancy is climbing in New York City and is much higher than the national average. New York City’s hotel occupancy rate reached 86.6% in 2017 and is projected to hit 86.6% in 2018, far exceeding the national average of 61.6%. In 2019, CBRE predicts the occupancy rate will drop only slightly, to 86.5%, as new supply is projected to slowly overtake growth in demand, CBRE states.