In its 2024 Global Midyear Hotels Outlook, CBRE forecasts U.S. revenue per available room growing by 1.2 percent in 2024, down from its earlier expectation of 2 percent growth. Despite the reduced full-year expectations, RevPAR growth is expected to improve in H2 2024, increasing by 2 percent versus 0.5 percent in H1 2024.
The second-half growth expectations are underpinned by demand from:
- Election-related and other special events
- Easier prior-year growth comparisons
- More inbound international travelers
- Slight uptick in both group and individual business travel demand
Although CBRE had expected a slowdown in 2024, growth has been more modest than anticipated, despite a resilient economy.
Headwinds such as record outbound overseas international travel; a weaker consumer; and increased competition from short-term rentals, cruise lines and other lodging alternatives have offset the recovery in inbound international travel and modest pickup in both group and individual business travel.
Given these dynamics, CBRE expects urban and airport location hotels to outperform and resort locations to continue underperforming as return-to-office policies and pent-up demand for travel post-pandemic normalize.
Revenue Growth
On a full-year basis, CBRE forecasts RevPAR to grow by 1.2 percent versus an earlier expectation of 2.0 percent. The reduction in growth forecasts is largest for resort locations, which are now expected to experience flat year-over-year RevPAR growth, as compared with a 1.6 percent increase in the earlier forecast. While there is still demand for leisure travel, more Americans are vacationing in Europe and Central & Latin America and more frequently using cruise lines and short-term rentals, which continue to erode traditional hotels’ market share.
Through H1 2024, RevPAR in 57 of the 65 U.S. markets tracked by CBRE had recovered to pre-pandemic levels. Most of the eight markets that have yet to fully recover are in northern California and the upper Midwest. RevPAR in major markets on the East Coast such as New York, Boston, Washington D.C., Atlanta and Miami, is now above 2019's levels.
CBRE’s baseline forecast for 2024 is for GDP growth of 2.6 percent and average inflation of 2.9 percent. After stronger-than-expected GDP growth in Q2 2024, CBRE expects the expansion to slow over the back half of 2024 and into 2025. Softening consumer spending will dampen hotel demand, as will competitive threats from lodging alternatives.
Given elevated construction and financing costs, CBRE expects modest hotel supply growth of less than 1 percent over the next three years. Increasing global wealth and muted supply growth will support solid hotel fundamentals in the longer term. RevPAR is expected to increase at a CAGR of 2.5 percent over the next five years, barring a recession or exogenous shock to the global economy. Urban hotels will outperform, with RevPAR forecasted to achieve a CAGR of 3.5 percent, as those locations have been the slowest to recover and stand to benefit the most from inbound international travel.
Latin America
The outlook for Northern Latin America (Colombia, Costa Rica and Mexico) remains strong, with occupancy in Costa Rica this year expected to surpass its 2019 level of 67 percent. In Colombia, an improving economy; lower inflation, interest rate cuts; and government initiatives to bolster the hospitality sector could potentially attract more than 6 million tourists this year. Tourism in Mexico is expected to remain strong, attracting foreign investors and boosting the country’s status as a leading global tourism market.
Tourism in Mexico remains on a recovery trajectory, with 18.1 million international visitors arriving in the country in the year through May 2024, closing in on 2019 levels. Visitors from the U.S. accounted for 63 percent of arrivals, up 8.2 percentage points from the January-May 2019 period, followed by Canada with 13 percent, Colombia with 3 percent and the UK with 2 percent.
As of May, 9.8 million international visitors so far this year stayed in hotels, a figure that is 3 percent higher than pre-pandemic levels. Total average occupancy in May 2024 reached 60.3 percent, 0.8 percentage points below 2019 levels. However, beach destinations such as Cancun, Los Cabos and Mazatlan recorded above-average occupancy of 78.2 percent, 76.9 percent and 64.8 percent, respectively. Tourism in Mexico is expected to remain strong, attracting foreign investors and consolidating the country’s status as a major global tourism market.
Colombia’s tourism sector has recovered strongly from pandemic-era lows. Despite a slight decrease in hotel occupancy in 2023, the sector achieved a 12.8 percent growth in occupancy in the first four months of 2024. The same period saw the arrival of more than 2.1 million non-resident visitors, an increase of 7.3 percent percent. The outlook for tourism this year remains positive thanks to a combination of the improving economy; lower inflation; falling interest rates; and government-led initiatives to boost tourism in the six main regions: the greater Colombian Caribbean, the eastern and western Andes region, the Colombian massif, the Pacific and the Orinoquía. This could push up visitor arrivals above 6 million for the year.
The Costa Rican tourism sector continued its strong recovery in H1 2024, surpassing expectations and solidifying its position as a key economic driver. Costa Rican Institute of Tourism data so far show sustained growth in tourist arrivals over the past 18 months, mostly from North America and Europe. Performance in 2023 was particularly impressive, with 16.9 percent growth in tourist arrivals and average occupancy of 65.3 percent, close to 2019 levels. This positive momentum continued into H1 2024, with a 14.5 percent increase in tourist arrivals. The outlook for the back half of 2024 is positive, with annual arrivals set to exceed 2.8 million, representing growth of 13 percent. Occupancy is expected to surpass 67 percent, exceeding pre-pandemic levels.