In the coming year, occupancy is expected to remain high but stay relatively flat or dip slightly lower according to a recently released 2018 Outlook report from Moody’s Investors Service. Occupancy will largely remain flat because of supply and demand reaching parity, which the report attributes to the toll of alternative lodging competition and weak corporate profit growth.
The lodging industry’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) is expected to grow 5 percent to 6 percent based on 1 percent to 3 percent growth in RevPAR and new hotel supply. Excluding Marriott and Hilton, which account for half of the rated lodging adjusted EBITDA, EBITDA is expected to grow 4 percent. Muted Global GDP growth is expected to support 1 percent to 3 percent growth in ADR in 2018. Flattened or modestly declined occupancy and slow ADR growth still supports RevPAR growth of 1 percent to 3 percent.
According to the report, the outlook could shift to negative if occupancy and/or ADR declines, which would lead to flat or negative RevPAR growth. On the flip side, the outlook could shift positively if industry fundamentals like RevPAR support EBITDA growth greater than 5 percent.
