Hotel occupancy and RevPar hit a record high in 2023 and is expected to grow overall in 2024 by 3.0 percent year-over-year due to an increase in inbound foreign travelers, group meeting events, and increasing demand by leisure domestic travelers, according to a CBRE report.
In fact, several U.S. markets ended last year with RevPAR well above 2019 levels, in particular New York City, where strong leisure and global appeal, along with Airbnb restrictions, pushed room rents to record highs. San Diego also is a top post-COVID performer, with a healthy mix of group meeting business and leisure travel.
Performance, however, may be tempered by the high number of new hotels scheduled for completion in 2024, as well as competition from demand for alternative lodging sources, like cruise ships and short-term rentals. According to CoStar, 200 new hotels with 24,116 rooms are scheduled to open this year, a 37 percent increase compared to 145 in 2023.
Michael Selinger, senior manager in Strategy and Transactions at EY, noted, however, that new supply is concentrated in three key regions, comprising more than 50 percent of the new room count: the Pacific, Mountain, and South Atlantic regions, particularly California and Florida due to their enduring popularity among both leisure and business travelers.
But despite rosy hospitality activity, the rise in U.S. interest rates dampened hotel investment activity considerably, with sales volume dropping from $52 billion in 2022 to just $24 billion last year, according to CoStar. Sachin Avadhani, EY Americas Hospitality sector leader, also noted that hotel transaction volume dipped to just over $3 billion in the first quarter of 2024, marking a nearly 50 percent decrease in sales volume compared to the same period in 2023.
It wasn’t all bad news for hotel investment in 2023, as U.S. transaction volume was significant in certain regions and urban centers. “New York City, in particular, recorded its highest hotel transaction volume since 2016, reaching $3.3 billion,” said Avadhani, noting that this surge was driven by strong performance metrics in this market.
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