An industry trade publication has reported that the hotel industry appears to be headed for a downturn.
According to Hotel News Now, the industry is already in the early stages of a slowdown with year-to-date trends showing “negative occupancy for all but the highest and lowest chain scales, while urban markets are underperforming national averages.”
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The publication goes on to note that with softening revenue trends and rising costs, many hotels are witnessing “flat to down profits.”
At the same time, the article points out that the hotel industry downturn is not likely to be either long or especially deep.
“For hotels, I don’t expect the downturn to be nearly as deep as the last two, but with supply growth peaking around two percent, demand is unlikely to keep pace,” writer David Loeb notes in the Hotel News Now column. “Absent some exogenous event, I don’t see demand growth going negative. This should lead to national occupancy in the flat to down one percent range over the next 12 to 18 months.”
Loeb said evidence of the decline is apparent in recent STR data.
STR’s U.S. monthly industry performance presentation, which covers the number of submarkets with RevPAR decreases, showed that year to date through April 2019, 37 percent of submarkets are experiencing negative RevPAR change, versus 28 percent for the first four months of 2018.
The STR data also provides insight regarding negative occupancy change, Loeb wrote.
“The picture is considerably more negative, with 50 percent of U.S. submarkets showing declining occupancy over the first five months of 2019, versus 43 percent in the comparable year-to-date period in 2018.”
The publication also predicted that the majority of operators will likely cut rates in order to gain market share, perhaps by one percent to 1.5 percent.