Reduced occupancy triggers lower Q4 projections, but resulting forecast still optimistic. 

After summer profits did not meet expectations, CBRE is reducing their 2023 RevPAR  projections. Their revised forecast for 2023 RevPAR is $96.64. Initial projections they released in May expected a significant boost in revenue, thus even now that the’ve decreased their projections by $1.25 the new forecast would still a year-over-year 4.6% increase. 

Of course this means the optimistic projections for average daily rate (ADR) have been reduced as well. Their new ADR projection is for ADR to increase by 3.6%, down 10 basis points from their initial report in May. 

The initial forecast CBRE released was determined in part by the 1.6% growth in gross domestic product, since GDP tends to correlated with RevPAR. “Historically, there has been a strong correlation between hotel demand and GDP growth. This makes the decline in demand in Q2 2023 somewhat surprising given the stronger-than-expected GDP growth in the quarter,” said Michael Nhu, Senior Economist and CBRE’s Head of Global Hotels Forecasting.

But they lowered their estimates because occupancy did not meet expectations. However, even the category that least-met expectations, resorts, is still up by 15%, compared with pre-pandemic levels. On the other end of the average, urban locations performed best, with growth increases of 4.7%. 

“An analysis of travel trends suggests that record numbers of Americans are traveling abroad this summer with a particular focus on Europe and the Caribbean. Inbound international travelers to the US are still 27% below their pre-pandemic levels, causing a temporary imbalance in demand,” said Rachael Rothman, CBRE’s Head of Hotel Research & Data Analytics. “As long-haul flights from Asia are added back and visa delays ease, we expect to see an uptick in inbound international travel to the US, supporting further demand growth.”

The Q2 demand decrease of 1.2 year-over-year is the first drop since the end of pandemic-related decreases.