According to the May 2024 edition of Hotel Horizons, occupancy growth for the 65 major markets is projected to increase by 0.5 percent in 2024, resulting in an average occupancy rate of 68.9 percent. However, 32 of these markets are slated to see a decline in occupancy. The outlook for nationwide occupancy is slightly worse, as CBRE is forecasting national occupancy to increase by 0.2 percent in 2024 for an annual rate of 65.4 percent, which is only 97 percent of 2019 levels. Hotel demand continues to be pressured by competition from other lodging sources, such as short-term rentals and cruise lines, as well as record outbound international travel.
Although 53 of the 65 Hotel Horizons markets are forecast to experience increases in ADR during 2024, only 32 of these markets will see ADR growth above the major market average growth rate of 1.4 percent, and 22 above the national average of 1.7 percent. Lower-priced tier hotels will see the lowest level of ADR growth at 0.1 percent, which is below both the national average and the major market average ADR growth.
Upper-priced (2.3 percent) and middle-priced (1.4 percent) markets are poised for RevPAR growth in 2024, driven by modest ADR gains. Lower-priced hotels, however, are forecast to see declines in RevPAR (-0.1 percent), which can be attributed to declining occupancy (-0.2 percent).
Supply and Demand
The supply of hotel rooms entering the major markets in 2024 is now forecast to increase by 1.1 percent, down from CBRE’s 1.2 percent supply growth forecast in May 2024. Subdued supply growth indicates that hoteliers in these markets are still faced with hotel development challenges including the high costs of debt, construction and labor.
Contrary to the overall decrease in the pace of new rooms entering the market, some U.S. cities will experience significant gains in competition during the year. Hoteliers in Nashville, Austin, Milwaukee, Cincinnati and Dallas will see the greatest growth in supply, each with a growth rate above 2.3 percent in 2024.
Ten major U.S. markets, six of which are in the northeast, are forecast to experience a decline in supply during 2024. Shrinkages in supply can be attributed to the repositioning of assets across major markets, as older, less functional hotels and hotels requiring substantial renovations are being closed and redeveloped into alternative uses such as residential buildings. The markets with the most significant decreases in supply are Albany (-1.4 percent), Pittsburgh (-1.2 percent), Oklahoma City (-1.0 percent), Hartford (-0.8 percent) and Baltimore (-0.6 percent).
The strong increases in the demand forecast for 2024 in New Orleans (5.0 percent), Hawaii (3.5 percent) and San Jose (3.4 percent) will outpace their concurrent growth in supply. This indicates that these markets, which have been working towards an occupancy recovery since the pandemic, are still actively recovering and poised for continued growth. Other markets projected to enjoy relatively strong increases in demand during 2024 are Long Island (3.7 percent) and Washington, D.C. (3.4 percent).
Occupancy
Almost half of (32 of the 65) Hotel Horizons markets are forecast to experience a decline in occupancy, with only seven of these markets projected to suffer a decline in demand. The remaining markets are seeing occupancy declines attributable to supply increases that will exceed demand. By year-end 2024, only 11 of the 65 Hotel Horizons markets are forecast to exceed 2019 occupancy levels.
The greatest decline in occupancy is forecast for Nashville (-2.8 percent), followed by Coachella Valley (-2.7 percent), San Bernadino (-2.7 percent), Dallas (-2.4 percent) and Fort Worth (-2.3 percent). Despite the declines, these markets are still expected to achieve occupancy levels near or above 90 percent of their 2019 occupancy levels, indicating that full occupancy recovery is near.
The markets forecast to enjoy the greatest gains in occupancy in 2024 are Long Island (3.8 percent), New Orleans (3.7 percent), Baltimore (3.6 percent), Washington, D.C. (2.8 percent) and Pittsburgh (2.6 percent). These same northeast markets have been slow to rebound over the last four years and will start to enjoy higher occupancies as a result of slower supply growth.
Market Spotlight—Savannah, Ga.
Savannah, Ga. is forecast to achieve demand gains during 2024 (2.1 percent), outpacing both the U.S. (0.9 percent) and the 65 Horizons markets (1.6 percent) averages. Demand growth will be led by the middle (3.0 percent) and upper-priced (2.0 percent) tier hotels. The relatively strong demand growth can be attributed to gains in meetings and events and continued increases in both group and leisure travel.
Savannah’s convention center is currently under renovation and expected to double its meeting space availability. Savannah benefits from being a relatively small market with limited hotel supply and a very diverse economy. Future demand growth will be driven by two major projects in the market, the Georgia Ports Authority new terminal construction and the Hyundai Motor Group/LG Energy Solution’s Elective Vehicle (EV) and battery production plant. Combined, these projects will bring roughly $8 billion economic infusion to Savannah.
This article was originally published in the July/August edition of Hotel Management magazine. Subscribe here.
Lindsay Dyer is a senior research analyst for CBRE Hotels Research. To learn more about the Hotel Horizon® forecast reports for 65 markets in the United States, visit https://pip.cbrehotels.com/publications-data-products/hotel-horizons.