Marcus & Millichap recently released its 2018 Hospitality North American Investment Forecast. The report highlights emerging trends that are impacting hospitality investments, regional metrics from the United States and Canada, and construction and occupancy predictions for each area.
According to the new report, North American hotel owners will expense up to $1 million to furnish hotels under new tax provisions, which could prompt owners to invest in smaller assets. Additionally, the report finds that private investors are targeting hotels in the economy and midscale segments, and taking larger shares of transactions and volume.
New brands continue to pop up in different segments targeting different generations, and occupancy rates will benefit from this, according to the report. Employment will continue to grow in hotels and drive high-performance levels in 2018. And supply will rise 2 percent in upscale and upper midscale segments, with the majority of rooms being constructed in New York City, Nashville, and Dallas/Fort Worth markets.
Demographically, owners are attempting to appeal to millennials travelers who are expected to spend more than any other generation in the coming years. The report shows that hotels plan to do this by increasing food and beverage and amenity options to attract the 79 percent of millennials predicted to use paid vacation time to travel. Travelers across all generations are expected to take 4 domestic trips per person this year, which is expected to increase occupancy rates and revenue growth.
Inland markets are expected to out-perform coastal and metro markets. The top markets by RevPAR changes over 5 years are Nashville, which experienced a 50 percent growth, Atlanta, Orlando, and Seattle. The independent market has seen the biggest RevPAR change by chain scale in five years, growing by 25 percent, and is followed by the midscale segment at 22 percent growth.
The forecast predicts that corporate tax rates will encourage companies to increase hiring, wages, and business travel to grow sales. And while economic growth is currently at its most confident point since 2000, according to the report, the new tax law could affect both the economy and hospitality demand positively in 2018.
