June RevPAR Growth Slowed to 0.6% As Occupancy Declined 1.0%

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  June RevPAR growth slowed to 0.6% as occupancy declined 1.0%   

CBRE U.S. Hotels State of the Union August 2024 Edition

• Economy

  GDP growth is expected to slow following 2Q’s upside surprise.
  Real GDP growth of 2.8% in Q2 beat CBRE expectation of 2.0% for the quarter. Stronger growth in Q2 could offset lower growth in the back half of the year. Inflation will remain persistent ending the year at 3.1%, 10 basis points higher than previously expected.

  Consumer risks remain as wages moderate and unemployment ticks up.
  Unemployment rose to 4.1% as employment growth slowed to 0.1% and the consumer saving rate fell to 3.4%. Rising unemployment and lower savings weighed on consumer sentiment which fell to 66 in July from 68 in June. On a positive note, wage growth is still 86 bps above inflation.

  CMBS borrowing rates continued to decline in June to 7.7%.
  Rates are now down 1.3 p.p. from June 2023’s 9.0%. A portion of the decline is attributable to a 78-bps contraction in credit spreads. CMBS loan issuance nearly tripled from $0.6 bil. in June 2023 to $1.6 bil. in June 2024. The average loan size remained relatively steady at $57.3 mil, up slightly from $52.3 mil. in June 2023.

• Current Trends

  June RevPAR growth slowed to 0.6% as occupancy declined 1.0%.
  While holiday shifts have made for variable RevPAR growth over the past few months, YTD RevPAR is up 0.5%, roughly in line with June. RevPAR growth for upper-price tier hotels outperformed while lower-tier hotels continued to struggle. Urban hotels outperformed again in June posting 2.8% RevPAR growth.

  Brand.com continued to take share from other distribution channels.
  The shift in Easter led to increased GDS and Group bookings which rose 5.0% and 3.5%, respectively in Q2. Brand.com bookings reached 120% of 2019 levels, taking share from OTAs, which were below 2019 at 99%.

  GOP growth of 6.0% in May was the first increase in several months.
  May’s strong 5.1% total revenue growth more than offset the 1.1 p.p. contraction in GOP margins bolstering profits. Insurance, wage, and property tax increases continue to outpace revenue growth, pressuring margins.

• Food for Thought

  Short-term rentals posted 9.8% demand growth in June.
  Short-term rentals continued to take share from hotels, as hotel demand declined 0.4% in June. In Q2, competition from alternative lodging sources continued to hamper demand for hotel room nights. Cruise lines and STR demand were 11% and 32% above 2019 levels, respectively, versus hotel demand, which was 1% below 2019 in Q2.

  Inbound international travel is range-bound at between 80-90% of 2019.
  While inbound travel increased 14% year-over-year, outpacing the 10% growth in outbound travel, the persistent shortfall in inbound visitors is weighing on demand. Inbound travel reached 83% in 2019 compared with 119% for outbound visitation.

  TSA throughput increased 5.2% year-over-year in July.
  TSA throughput reached 107% of 2019 levels in-line with May and June. Consistently lower airfares are likely boosting TSA throughput, which in combination with steady wage gains, could be supporting RevPAR growth.

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