CBRE Hotels Raises Outlook for Second Half of 2022, Expects Continued Growth in 2023

The Thompson Denver hotel at 1600 Market, courtesy of DLR Group.

CBRE is raising its forecast for hotel performance in Denver and nationally on the heels of industry gains in Q2 2022 and the expectation of slightly positive GDP growth in 2023.

In Denver, CBRE revised its forecast for 2022 to a gain in revenue per available room (RevPAR) of 33.4 percent, up from the previous projection of 20.8 percent. The revision is predicated on the expected average daily rate (ADR) exceeding pre-pandemic levels this year in Denver, reaching $136.83 (compared to $136.68 in 2019). It also assumes a 17.9 percent increase in demand, up from the previous forecast issued in May 2022 that showed an 11.1 percent gain.

CBRE has also raised its forecast for Denver hotel occupancy. In May, the projection was for occupancy to rise 7.7 percent in 2022, hitting 63.3 percent. Per the new forecast, occupancy is anticipated to rise 14.2 percent this year, reaching 67.1 occupancy in Denver.

“The improvement in Denver’s forecast is largely attributable to a 30 percent increase in domestic and international passenger travel at Denver International Airport. This is an indicator that leisure and corporate travel to Denver continue to strengthen. Downtown Denver has the largest supply of upper-priced hotels and currently leads the larger metropolitan area in RevPAR gains,” said Zachary Alm, vice president with CBRE’s Valuation & Advisory Services in Colorado.

Looking ahead to 2023, CBRE projects occupancy, ADR, RevPAR and demand to continue to rise, albeit at a slower pace than 2022. Occupancy is anticipated to increase 3.8 percent (reaching 69.7 percent), ADR to rise 4.5 percent, RevPAR to increase 8.4 percent, and demand to improve 5.0 percent.

Nationally, U.S. hotel industry performance was stronger than expected in Q2 despite a decline in GDP and the highest inflation in more than 40 years. Strength in the quarter was the result of continued improvements in group business, inbound international travel, and what may have been a peak in leisure travel this cycle.

CBRE’s baseline-scenario forecasts do not contemplate an international war, a pervasive recession, or a more acute COVID variant. CBRE also produces forecasts based on upside and downside scenarios.

“As we progress through the third quarter, it is worth noting that the brisk pace of demand recovery has begun to slow. We are seeing a pullback in ADRs in select record-setting markets,” said Rachael Rothman, CBRE’s head of hotel research & data analytics. “Despite the slowing pace of growth, we expect the continued recovery in travel demand to be driven by incremental group and inbound international travel, followed by a modest uptick in transient business.”

Inflation continues to bolster top-line growth, but it is also a headwind to margin expansion given rising wages, utilities, food and beverage costs, insurance and capital expenditure (CapEx) increases. Historically, luxury hotels have had the greatest ability to increase room rates to offset inflation.

Longer term, muted supply growth will bolster top-line growth. High construction material prices, including lumber, steel and labor, make the development of new projects too expensive in some cases. CBRE forecasts that the national hotel supply will increase at a 1.1 percent compound annual growth rate over the next five years, below the industry’s 1.8 percent long-term historical average.


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