U.S. Hotel Demand Hits an All-Time High
September 5, 2017 12:25pm
By Richard Barkham
Good News for the Business Cycle and the New Economy
Hotel demand has just reached an all-time high in the U.S., according to CBRE Hotels’ Americas Research. Occupancy levels and demand for rooms are also buoyant in Europe and Asia Pacific.1
Demand for hotel rooms is highly sensitive to business conditions, particularly on the downside.
When business revenues and personal incomes are squeezed at the end of the cycle, hotel demand drops away very quickly. Hotel demand has shown strong growth since the middle of 2016, suggesting that business conditions in the U.S., and elsewhere in the world, are robust despite relatively weak GDP growth.
But there is more in these data than a solid cyclical upswing.
A major structural shift is underway as well. We can see this in Figure 1, where the bounce back in hotel demand after the Great Financial Crisis was large and rapid. Figure 2 analyzes this in more depth.
This chart shows the number of hotel rooms sold each quarter in the U.S., divided by the number of people over the age of 16 (my definition of the working-age population). I make this adjustment because the working age population has increased by 38% since 1988, some 70 million people, and I would expect the number of hotel rooms to expand over time, just to accommodate this cohort.
So, what are the key takeaways?
Why is hotel and non-hotel lodging in such high demand?
What are the implications for real estate?
As an afterthought, let’s not forget that the hotel sector in most of the developed world depends to a much greater extent than other industries on migrant labor. If the flow of migrants is diminished, it is not at all clear that the jobs would be taken up by native-born workers; it’s more likely the growth of this highly vibrant sector would be constrained. That would be a shame.
1STR, Inc., Hotel Review Report, August 2017.
2Vicki Gelfeld, American Association of Retired Persons, 2017 Travel Trends presentation, November 2016.
3Wall Street Journal, Budget Airline Ambitions Remake Global Travel, August 24, 2017.
u.s. hotel demand
Richard is a specialist in macro and real estate economics. He joined CBRE in 2014 as Executive Director and Global Chief Economist. Prior to taking up his position with CBRE Richard was a Director of Research for the Grosvenor Group an international business with circa $10bn of capital under management in real estate.
Contact: Richard Barkham
+44 20718 22665
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