U.S. Lodging Data Points to Slow Growth

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NEW YORK—U.S. lodging data shows essentially flat overall hotel occupancy growth last year, Moody’s Investors Service says in a new report by STR. At just 0.1 percent, occupancy growth came in at the low end of the rating agency’s forecast for 0 percent to 1 percent expansion, though in general it remains at historical highs after two years of strong increases. In 12 of the top 25 markets, occupancy rates fell in 2016, prompting operators to sacrifice room rate increases to drive occupancy and maintain growth in RevPAR, or revenue per available room.

“With some hotel operators forgoing room rate hikes to drive occupancy and maintain RevPAR growth, the average daily room rate did not increase as much as we anticipated last year,” said Senior Vice President Margaret Taylor. “And with occupancy plateaued at historical highs, modest growth in US GDP and corporate profits precluded hotel operators from maintaining their pricing power to the extent expected.”

The average daily room rate (ADR) grew 3.1 percent last year, below Moody’s forecast range of 3.5 percent to 4.5 percent. Full-year RevPAR growth came in at 3.2 percent, also at the low end of Moody’s forecast range, signaling that EBITDA growth will be closer to 5 percent than 6 percent. Though RevPAR growth is highly correlated with EBITDA growth, new hotel openings will bolster the latter for 2016.

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In 2017, Four Seasons Hotels and Belmond Interfin will outperform the industry, due mainly to new hotel openings and renovations of existing properties, Moody’s says. Marriott International, Inc. and Hilton Worldwide Finance, LLC will perform largely in line with the overall industry, while Hyatt Corporation and Wyndham Worldwide Corporation will underperform.

And as all the major chains continue to construct new hotels, supply will outpace demand in the year ahead. Meanwhile, with occupancy at historical peaks and increasing competition from Airbnb, demand growth will stall, further pressuring occupancy, RevPAR and earnings. EBITDA, however, will nevertheless be bolstered by new hotel openings, resulting in the ratings agency’s forecast EBITDA growth for the US lodging industry coming in between 3 percent and 5 percent next year.