Fitch Ratings-New York/Chicago-16 May 2018: U.S. lodging RevPAR growth will be in the 2% – 4% range in 2018, according to Fitch Ratings. The agency raised its prior outlook of 0% – 2% growth due to better than expected corporate transient lodging demand in the context of continued, strong leisure demand and moderate industry supply growth. Higher-end resort hotels will outperform but elevated supply in key markets such as New York City will weigh on urban and upscale hotels. The sector credit outlook is stable, with most issuers reporting healthy operating fundamentals and managing leverage within stated financial policy targets.

U.S. lodging RevPAR growth has been positive for 92 months through April, making this the second longest recorded RevPAR recovery since the 1980s, after the 112-month, 1993 – 2001 recovery. Although occupancy and real ADR are above prior cycle peak levels, RevPAR growth is accelerating due to improved corporate transient lodging demand, supported by increased private, nonresidential fixed investment. Leisure transient remains the strongest industry demand segment, fueled by strong consumer sentiment and low U.S. unemployment.

Fitch expects supply to grow at or slightly above the 2% long-term annual average, but 2018 could represent a peak in supply growth for the current lodging cycle based on existing pipeline data. The popularity and low capex associated with building limited-service hotels has led to elevated new supply in select secondary and tertiary markets. The April Federal Reserve Loan Officer Survey showed more domestic banks tightening CRE construction loan standards than easing, which has been the case since the first half of 2015.

Hotel investment sales volumes are poised to increase this year, despite higher interest rates and hotel values. REITs will likely become net acquirers given stronger equity values and the scope for sector M&A. YTD U.S. hotel sales volumes are pacing slightly higher than the same period last year, while cap rates have declined modestly to the low 8% range.

Additional information can be found in the "U.S. Lodging Cycle Concierge" report published today, available to subscribers through the link above or at www.fitchratings.com.

Contact: Stephen Boyd, CFA Senior Director, U.S. Corporates +1 212 908-9153 Fitch Ratings, Inc. 33 Whitehall St. New York, NY 10004

Carla Norfleet Taylor Senior Analyst, Fitch Wire +1 312 368-3195 Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60602

Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: [email protected].