August 31, 2022

A Pictorial Update on Our Latest Thoughts and the Facts and Figures Influencing Our Industry

 

The CBRE Hotels Research State of the Union showcases a pictorial review of current hotel trends, leading and coincident indicators of hotel demand, and an update on cost pressures and margin flow-through. The report showcases current demand trends, as well as fundamentals by segment, location type and chain scale. The report also provides a brief update on short-term rental, group business, and capital market trends, the transaction market, the impact of virtual work and the outlook for office vacancy.

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Key Takeaways


  • Despite downward pressure on economic growth and inflation headwinds, RevPAR exceeded 2019’s levels for the fifth consecutive month; however, demand growth is slowing, and we are seeing the first signs of margin pressures owing to more difficult comparisons, a slower than expected return to office and wage pressures. [slide 6, 12, 26, 45, and 51]

  •  The removal of the testing requirement has led to an uptick in inbound international visitation. The planned relaxing of regulations in Asia should lead to further gains in the Western U.S.  [slides 47 and 48]

    Hotel-specific top line leading indicators show no signs of deterioration, and in fact, are showing signs of improvement. [slides 36 -38 and 43 - 44]

  •  CBRE Hotels Research forecasts a full recovery in ADR and RevPAR in 2022, a recovery in demand in 2023, and a recovery in occupancy in 2025. To date, the recovery has been led by lower priced hotels and those outside of city centers; however, those categories are showing improvement. [slides 65 -68]

  • CBRE Hotels Research expects 28 markets to exceed 2019’s levels in 2022 and 37 markets to lag. [slide 69]

  • Operating revenues have recovered for limited service and extended stay properties; however, for full-service business and group centered hotels, a short-fall in F&B and Other revenues has muted the recovery. The reopening of lower margins amenities and inflationary pressures have caused gross operating margins to come under pressure in recent months. [slides 50 - 54]

  • The supply outlook continues to face headwinds caused by labor shortages, wage pressures, and supply chain issues. However, recently, hotel construction starts picked up slightly rising to $1.4 million. This bodes well for future pricing power. [slide 60]

    Credit metrics continue to improve fueled by hotel reopenings, strong pricing power, and constrained occupancies. [slides 62 and 63]

 

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Contacts


Rachael Rothman
Head of Hotels Research
CBRE Hotels
[email protected]

Will Webster
Sr. Research Analyst
CBRE Hotels
[email protected]