Greater Los Angeles area hotels are likely to experience another year of occupancy and room rate increases , driven by strong employment growth and travel demand
Los Angeles – Mar. 13, 2019 – Continued favorable economic fundamentals are expected to lead to U.S. hotel rooms revenue per available room (RevPAR) growth of 2.5 percent in 2019 and 2.0 percent in 2020, according to the latest forecast from CBRE Hotels Americas Research.
“Supply, demand and pricing in the U.S. lodging industry are very similar to what we have observed the past few years,” said R. Mark Woodworth, senior managing director of CBRE Hotels Americas Research. “For the most part, we expect the supply of hotel rooms entering the market to be absorbed by newly generated demand buoyed by a healthy economy. Further, while the nominal rate of change will be modest, we are projecting average daily rate (ADR) growth above the pace of inflation for 2019 and 2020.”
Hotel occupancy at hotels in the Greater Los Angeles area is forecast to climb roughly one percentage point to 81 percent this year, with revenue per available room, an industry measure of occupancy and rate, likely to increase 3.2 percent to $148. Average daily rates at higherpriced properties is expected to rise 1.4 percent to $231.79 in 2019 while climbing 2.8 percent to $119.40 at the lower-end spectrum. In both categories, occupancy is likely to slip by 1.2 percentage points to 82 percent and by 0.2 percentage points to 77 percent in 2020, respectively.
“Employment has been the main driver for demand in the U.S. and in this region,” said CBRE Hotels Managing Director Jeff Lugosi. “We have continually seen 150,000 to 200,000 jobs being added per month, which has in turn added to outsized growth in the lodging space. The LA area has greatly benefitted from a diverse business and leisure marketplace. At the lower end, demand has been driven by young, first-time travelers and price-conscious vacationers.”
He added, “Looking into 2020, the likely softening in occupancy in this region is mostly related to elevated supply and some possible slowdown in certain metrics, such as employment growth, given the stage of the economic cycle we’re in.” Nationwide, a variety of factors have muted average daily rate growth during the past few years, including low inflation, increasing competition from non-traditional forms of lodging and the intervention of intermediary sales channels, according to John B. (Jack) Corgel, Ph.D., professor of real estate at the Cornell University School of Hotel Administration and senior advisor to CBRE Hotels Americas Research.
Additionally, several macro factors such as the 2008-09 banking crisis, European debt defaults, Brexit and U.S. government shutdowns have made travelers more cautious, resulting in shorter booking times, a decline in non-essential travel and enhanced price-sensitivity, according to Corgel.
The March 2019 edition of Hotel Horizons for the U.S. lodging industry and 60 major markets can be purchased by visiting: https://pip.cbrehotels.com