Finance & DevelopmentFinanceFitch: 2016 Global Hotel Outlook Stable

Fitch: 2016 Global Hotel Outlook Stable

NEW YORK—The 2016 outlook for the global hotel industry is stable as favorable travel trends and stable financial policies should allow most issuers to operate within Fitch’s rating sensitivities, according to Fitch Ratings. Fitch expects global RevPAR growth will modestly decelerate to a healthy 3 percent to 5 percent.

“Middle class growth in emerging markets, relaxed barriers to visitation by some important destination countries, and growing consumer preferences for experiential rather than material purchases, means hotel RevPAR growth is here to stay for another year, despite some new and familiar risks to the sector,” said Stephen Boyd, director of lodging and REITs at Fitch Ratings.

The largest risks to Fitch’s outlook include geopolitical events that reduce travel demand, corporate reorganizations like M&A and divestitures, and an unanticipated industry downturn with severe RevPAR declines. The rapid growth in online alternative accommodation websites also warrants closer scrutiny.

The U.S. lodging upcycle will likely continue in 2016, even as investor sentiment checked-out this year on weak hotel share prices, modest guidance cuts and emerging competitive threats (e.g. OTA consolidation, Airbnb, Inc.). While Fitch doesn’t foresee the upcycle unraveling in the next one to two years, current hotel operating metrics warrant a healthy level of investor apprehension, as most suggest the industry has entered the twilight of this upturn.

Austerity measures and structural reforms in some European countries will likely dampen consumer spending and temper rate growth in the region, making average room rate (ARR) growth unlikely to outpace that seen in 2015.

In Asia, China’s RevPAR growth will continue to pick up as the market moves closer to equilibrium from its current oversupplied position. Double-digit increases in tourism over the next five years and improving transportation infrastructure should also support growth.

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