US Hotel Occupancy Drops For The First Time Since 2009
US hotel occupancy declined in the first quarter of 2016, down 0.5%—marking the first decline in occupancy since Q4 ’09, according to STR.
The annual occupancy rate for both 2016 and 2017 is expected to decline as supply increases outpace demand growth, according to CBRE's June 2016 edition of Hotel Horizons.
“The first quarter decline in occupancy is a concern for US hotel owners and operators,” CBRE Hotels’ Americas Research senior managing director Mark Woodworth (pictured above left with PKF Hospitality Research's Robert Mandelbaum) says. “The industry has been on a good run for the past five years, and there were no obvious economic warning signs foreshadowing a decline in occupancy.”
As Bisnow reported last week, the massive rise in NYC hotel supply puts $3.86B in CMBS at greater risk of default—at a time when new risk retention requirements and the CMBS maturity wall already pose threats to the CMBS market.
The hotel market’s supply growth comes alongside a deceleration in demand growth, as the dollar rises in comparison to currency in countries that provide a lot of tourism to the US, such as Canada and Brazil—lowering the buying power for their citizens.
CBRE Hotels’ Americas Research senior adviser John B. Corgel says, with lodging being a cyclical industry, the high pace of RevPAR (revenue per available room) growth seen during the recovery—about 6% to 8% annually, according to Mark—could not be sustained forever.
“The industry has passed the uphill recovery phase of the cycle, and we are now in a prolonged period at the top,” Mark says. “Looking forward two to three years, we do not see any reason why US hotels should not continue to enjoy gains on both the top and bottom lines, albeit at a more modest pace compared to the past two or three years.”