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CBRE US Hotels State of the Union May 2024 Edition
CBRE US Hotels State of the Union May 2024 Edition
Key Takeaways:
- Economy
Q1 economic growth was slower than expected.
1Q GDP came in at 1.6%, below CBRE’s 2.3% estimate. We expect disappointing 1Q growth will result in a downward revision to CBRE’s full-year 2024 real GDP growth forecast of 2.3%. Inflation is proving stickier than expected, resulting in a 70-bps increase in CBRE’s 4Q Fed Funds rate from 4.4% to 5.1%.Higher leverage and the burndown of COVID savings put consumers at risk.
Excess Covid savings fell to essentially zero in March, from a high of $2.16 trillion in September 2021 and the personal savings rate fell to 3.2%, below the long-term average of 6.6%. Consumer leverage remains below pre-pandemic levels but has increased 0.24 percentage points since 1Q23.The 82-bps contraction in borrowing rates drove a 3x increase in loan size.
The average hotel CMBS loan size increased from $15.3 million in March 2023 to $48.9 million in March 2024, however the number of loans originated fell from 28 to 10. Credit spreads contracted ~140 bps y/y partially offsetting the higher base rates. - Current Trends
March RevPAR decline was steeper, partly because of the shift in Easter.
March RevPAR declined 4.1%, owing to a 1.1% ADR decline and a 3.1% occupancy decline. Surprisingly, despite the benefits of the Easter shift, Resort RevPAR continued to decline in March, dropping 5.3%. Independents continued to weaken as trends continued to normalize to pre-pandemic levels.Brand.com continued to take share from other channels during the quarter.
Brand.com market share increased 350bps in the quarter and segment demand hit 120% of 2019’s levels. Corporate and Group continued to improve, with demand nearly reaching 2019’s levels.Total hotel revenues fell for the first time, further pressing profits.
Total hotel revenues per available room fell 0.2% in February, the first decline since the post-pandemic recovery. Top line declines and a 0.8 percentage point contraction in margins resulted in a 4.8% decrease in GOP. - Food for Thought
Easter shift drove short-term rental outperformance in March.
Short-term rental demand rose 15.2%, outpacing the 2.5% decline in hotel demand. This is no surprise as STRs are essentially 100% leisure, and they benefitted from the Easter shift. Cruise lines and short-term rentals continue to take share from traditional hotels, reaching 113% and 142% of 2019 levels, respectively in Q1.Outbound international travel continues to outperform inbound.
Outbound international travel was 117% of 2019’s level in March compared to inbound visitation of 94%. Inbound visitation to both the East and West Coast hit post-pandemic highs in March as inbound visitation from Asia continued to increase, hitting 74% of 2019 in March.TSA throughput increased 5.1% year-over-year in April.
TSA throughput reached 106% of 2019 levels during the month. Despite continued strength in passenger volumes, searches for paid and redeemed travel remained soft in April and Airport hotel RevPAR has lagged at down 1.5% in Q1.
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