Hotels Food
CBRE Forecasts Enhanced RevPAR Growth in 2023 Despite Economic Headwinds
CBRE Forecasts Enhanced RevPAR Growth in 2023 Despite Economic Headwinds

Written by: Rachael Rothman and Matt Mowell

Despite projections of persistent inflation and a moderate economic recession, CBRE’s November 2022 Hotel Horizons® forecast calls for a 5.8 percent increase in rooms revenue per available room (RevPAR) in 2023. This is up from CBRE’s previous forecast of a 5.6 percent increase in RevPAR for 2023.

Propelling CBRE’s increased outlook for RevPAR is an expected 4.2 percent rise in average daily rate (ADR), driven in part by the continuation of above long-run average inflation. For 2023, CBRE is forecasting the Consumer Price Index in the US to increase by 3.5 percent YoY. Inflation continues to have a mixed impact on the hotel industry, bolstering top-line growth while pressing margins.

Supply and Demand

Inflation is also impacting development activity. The combination of rising construction material costs, a tight labor market, and high interest rates will serve to keep supply growth over the next five years 40 percent lower than historical trends. Instead of construction, we expect cash flows in the near term to be focused on debt reductions, renovations and renovations given the backlog of Capex that built up during the pandemic.

Given its forecast for a 0.2 percent decline in 2023 gross domestic product (GDP), CBRE lowered its expectations for demand growth from 3.3 percent in their August 2022 forecasts to 2.9 percent in the November update. With the projected supply increase remaining at 1.2 percent for 2023, the net result is a reduction in CBRE’s occupancy growth estimate for the year to 1.6 percent, down from the 2.0 percent increase previously forecast. The lowering of occupancy expectations will somewhat offset the enhanced outlook for ADR growth.

It is worth noting that the 5.8 percent RevPAR growth forecast for 2023 is front-end loaded, particularly in the first quarter of the year given the easy comparisons created by the outbreak of the Omicron variant in early 2022. Our RevPAR forecast for the first quarter of 2023 calls for a 15.6 percent gain, followed by 2-4 percent growth over the balance of the year.

Chain Scales

By the end of 2023, CBRE forecasts all chain scales to have surpassed their respective 2019 RevPAR levels. Economy and midscale hotels recovered to 2019 levels in 2021. Closures, higher rents and displacements from shelters will continue to shift people from homes and apartments to lower-priced hotels offering weekly and monthly rates.

Luxury and upper-upscale properties have lagged in recovery because of their dependence on individual corporate and group demands. Hotels that operate in these segments will not achieve RevPAR recovery until the end of 2023.

Markets

CBRE prepares Hotel Horizons® forecasts for 65 of the largest markets in the US By year-end 2023, 53 of the 65 Horizons® markets are expected to have reached, or surpassed, their 2019 RevPAR levels. That leaves 12 more to recover in 2024 or beyond. The majority of markets lagging in recovery are in northern California, the upper-Midwest, and along the northeast corridor from Washington, DC through New York.

At the other end of the spectrum, the leisure-centric destinations of Savannah, Miami, St. Petersburg and the Coachella Valley in California are forecast to exceed their 2019 RevPAR levels by more than 20 percent in 2023.

The Economy

CBRE’s Hotel Horizons® forecasts are based on economic assumptions prepared by CBRE Econometric Advisors (CBRE EA). As of October 2022, the CBRE EA is expected to be the following for the US economy in 2023.

A Recession

CBRE EA anticipates that a moderate recession will last through the first half of 2023 for the following reasons:

  • The key trigger of this downturn is the Fed’s aggressive rate hikes delivering its intended effects.
  • Higher household debt costs are weighing on consumption of big-ticket items, such as housing and reportedly autos.
  • A strong USD will impede exports.
  • Higher corporate cost of capital is forcing firms to shelve expansion plans and layoff announcements are increasing. This will soften the labor market via a falling job opening rate in the near term, and the unemployment rate should increase to 5 percent by 2024.

Inflation

The pace of annual inflation is likely to peak during the summer of 2022. Moving into autumn, easing commodity and consumer goods prices are weighing on CPI. The largest component of CPI—housing—is also peaking. Some monthly data points suggest that both rental and for-sale prices are falling. Nevertheless, the Fed remains vigilant about rising services costs and the prospect of embedded inflation. This should keep the Fed Funds Rate trending upward through mid-2023 and peaking north of 4.5%. Indeed, this outlook is predicated upon decelerating inflation to 3.5 percent by year-end 2023. It is entirely plausible that inflation could remain stubbornly high, which would trigger a stronger response from the Fed and a more painful recession.

It should be noted that the CBRE lodging forecasts presented in this article do not contemplate a global war, a pervasive recession or a more acute COVID variant.

This article was originally published in the January 2023 edition of Lodging and has been shared on HFTP Connect for the benefit of HFTP hotel finance members.


Rachael Rothman is head of CBRE Hotels Research and Data Analytics. Matt Mowell is senior economist at CBRE Econometric Advisors. To obtain CBRE’s Hotel Horizons® forecast reports, please visit pip.cbrehotels.com/hotelhorizons. This article was published in the January 2023 edition of Lodging.

Hotels Food
How to find an eco-friendly hotel
A hotel bed.

A hotel bed. Illustrated | Getty Images

You reduce, reuse, and recycle at home. And when it’s time to stay in a hotel, your desire to be as good to the planet as possible doesn’t go away. But finding an “eco-friendly” hotel can be a challenge. There’s a lot more to reducing a property’s environmental footprint than asking guests to reuse their towels. Hotels need to find ways to conserve energy, reduce water use and waste, source products from local vendors, and eliminate items like single-use plastic.

It’s important to be on the lookout for buzzwords and claims that can’t be backed up with receipts. Some hotels might tout themselves as being green, but their only offering is an electric vehicle charging station. A property that is actually walking the walk will explain its initiatives and share its water and energy reports, which will detail how much each is saved.

There are other questions to ask about an eco-friendly property: What is its waste management plan? Does it source food and other products locally? Does it give back to its local community and pay its staff a fair wage? Does the hotel have LEED certification from the US Building Council, or other official accreditations? If you want to know more or need clarification on any topic, call the hotel and ask to speak with someone who can answer your queries.

Here are a handful of hotels working to reduce their environmental footprints:

1 San Francisco Hotels

At 1 San Francisco Hotels, sustainability meets luxury. The property, open since June 2022, is inspired by nature, and embraces the idea of ​​indoor/outdoor living, with preserved plants and driftwood in the inviting rooms and public spaces. Joel Costa, director of sales and marketing at 1 Hotel San Francisco, told The Week designers utilized locally sourced and repurposed materials for the property, with the lobby flooring consisting of 7,000 square feet of reclaimed barn wood and each guest elevator landing made of redwood lumber from the original San Francisco Bay Bridge. There are also gentle reminders for guests on steps they can take to conserve water, like the 5-minute timers in the showers, and through the 1 Less Thing program, they can leave behind extra clothing and accessories, which is donated to the St. Anthony Foundation, a local social services organization.

A king suite at the 1 Hotel San Francisco.

A king suite at the 1 Hotel San Francisco.

Courtesy of 1 Hotel San Francisco

The hotel’s restaurant, Terrene, primarily uses ingredients sourced from within 100 miles, “and we’re fortunate to be in Northern California, where this is possible,” Costa said. The greens don’t have to travel far — they come from the chef’s rooftop garden — and several of the cocktails on the menu are zero-waste. “In the kitchen, we divert about 71 percent of our waste out of landfills,” Costa said, through composting and recycling. The 1 Hotel San Francisco is under certification review for a LEED gold standard hotel.

Catherine Garcia was a guest of 1 Hotel San Francisco. Nightly room rates start at $490.

The Nature Inn at Bald Eagle

Located inside the Bald Eagle State Park, the Nature Inn at Bald Eagle offers a one-of-a-kind experience. There are lake views, forest views, and garden views, all from the comfort of this LEED Gold property in Howard, Pennsylvania. The hotel uses GeoThermal heating and cooling, and its 2,800-gallon rain water harvesting system is used to flush the toilets. Several of the windows are made from fritted glass to reduce bird strikes, and the Forest Stewardship Council certified white oak grown in the state was used to create the mission-style furniture found throughout the property. The patio furniture is made of recycled aluminum, and the counters at the front desk and library were constructed from sunflower seed hulls.

Nightly room rates are seasonal, and start at $115 in the winter.

The Allison Inn & Spa

the Allison Inn & Spa in Newberg, Oregon, is a well-oiled green machine. It received its LEED Gold Certification less than a year after opening in 2009, and since then has been adding to its eco-friendly initiatives. The hotel, which uses solar panels to heat the water used in the spa and across the property, has eliminated the use of plastic bottles and Styrofoam, focuses on bulk products rather than single-use items, and instead of air conditioners, turns to Mother Nature , opening windows so the breeze can cool things down. At the on-site Jory Restaurant, many of the dishes contain ingredients from the chef’s 1.5-acre garden and greenhouse, a welcome addition to the already lush grounds.

Nightly room rates start at $555.

Inn by the Sea

Right on the coast, the Inn by the Sea in Cape Elizabeth, Maine, with its lovely gardens that serve as habitat for wildlife and butterflies, is a charmer. The hotel has Silver LEED certification, and the goal of maximizing its eco-friendly offerings in order to minimize its footprint. The pool is heated by solar panels, while the spa’s sheet rock walls and cork flooring are made of recycled materials. The on-site Sea Glass restaurant works with local fishermen and farmers to get sustainable fish from the Gulf of Maine and organic produce, and all food waste is composted. The Inn by the Sea also partners with local schools by purchasing books from their wish lists and making donations to local environmental organizations.

Nightly room rates start at $284.50.

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