CBRE is forecasting revenue per available hotel room (RevPAR) will continue to grow steadily in 2024, driven by improving group business, inbound international travel and traditional transient business demand.
CBRE forecasts a 4.3% increase in RevPAR growth in Denver in 2024, with occupancy improving by 100 basis points (bps) and average daily rate (ADR) increasing by 3.3%. This projected growth indicates the continued recovery of the lodging industry, with the national RevPAR in 2024 expected to be 13.2% higher than 2019 levels.
“The Downtown Denver submarket currently leads the larger metropolitan area with a year-ending 2023 RevPAR of $129.20, which represents a 9.7% year-over-year increase,” said CBRE’s Zachary Alm, a vice president with CBRE Hotels Advisory in Denver. “The attendance to concerts, sporting events and venues like the Colorado Convention Center have all contributed to the increases for occupancy, ADR and RevPAR.”
“The Downtown Denver submarket currently has several upper- and mid-priced hospitality properties currently under construction or in the pipeline,” he added.
CBRE forecasts that occupancy will continue to increase in Denver over the next two years, to 71.6% and 72.6% in 2024 and 2025, respectively. Supply will follow the same trend, increasing by 900 units in 2024 and 547 units in 2025.
CBRE’s baseline forecast anticipates GDP growth of 1.6% and average inflation of 2.5% in 2024. Given the typically strong correlation between GDP and RevPAR growth, the relative strength of the economy will directly impact the performance of the lodging industry.
“We expect RevPAR growth to be slower in the first quarter due to last year’s strong performance, but to reach its peak in the third quarter driven by the influx of inbound international travelers during the busy summer season,” said Rachael Rothman, CBRE’s head of hotel research & data analytics. “Urban and airport locations should particularly benefit from group and inbound international travel, as well as the normalization of leisure travel.”
In 2023, the U.S. economy exceeded expectations with a GDP growth rate of 2.5%, resulting in a record RevPAR of $95.84, a 3.2% year-over-year increase. RevPAR growth was driven by a 2.7% increase in ADR and a 0.31 percentage point increase in occupancy. This growth was driven by group business, inbound international travel, and an uptick in traditional transient business demand.
“Despite the upside surprises in employment and GDP growth in 2023, lodging demand fell short of initial expectations due to the popularity of lodging alternatives like cruises and short-term rentals,” said Michael Nhu, senior economist and CBRE’s head of global hotels forecasting.
CBRE expects muted supply growth in the medium term due to elevated financing and construction costs and the limited availability of properties that can be purchased below replacement costs. For 2024, CBRE expects supply growth of just under 1%, with hotel supply projected to maintain a compound annual growth rate (CAGR) of 0.87% over the next three years.
The February 2024 edition of Hotel Horizons for the U.S. lodging industry, 65 major markets, the six hotel chain scales and six location types can be purchased by visiting: https://pip.cbrehotels.com/hotelhorizons.
