- In a November report outlining its predictions for the U.S. hospitality market, professional services company PwC said occupancies, ADR and RevPAR will be increased year on year for 2023, though decelerating growth is expected in the fourth quarter and into 2024.
- The company predicted that demand growth will slow, ADR will gradually decelerate and RevPAR will continue to moderate in 2024.
- In May, PwC forecasted that changing macroeconomic conditions would have a “downstream impact” on hotel performance for the remainder of 2023 and into 2024. The company maintained that outlook in the November report, saying economic headwinds and geopolitical tensions will likely impact hotel performance through next year.
The U.S. hotel market will see annual performance growth for 2023, but growth is expected to decline in the fourth quarter and into 2024 due to economic headwinds and geopolitical tensions as well as changing traveler behavior, PwC’s November report details.
The Federal Reserve’s continued increases in its policy rate, continued declines in the public markets since early August and the ongoing Israel-Hamas war have begun to have a downstream impact on hotel demand, according to PwC.
Leisure demand specifically, while still strong, PwC said, began to soften in the second half of this year, as “other parts of the world continued to reopen their vacation destinations and leisure travelers began to once again feel safe traveling abroad.” Increases in individual business travel and group business have not yet been able to fully offset this softening.
Because of these factors, occupancy levels, which have declined in each of the past seven months, are expected to continue to be down during the remainder of this year and through at least the first quarter of 2024, PwC said.
Occupancy will stand at 63.2% in 2024, as a result of “sluggish demand growth” in the first half of the year that will pick up in the latter half, PwC predicts.
PwC also forecasts that growth in ADR will gradually decelerate throughout 2024 but still be up 2.4% at year-end. And RevPAR will continue to moderate during 2024, rising 2.7% year over year.
PwC expects to see a gradual rebound in hotel occupancy rates starting in the second quarter of 2024, along with RevPAR growth once again exceeding PCE inflation. This outlook, though, could be impacted by “the pace and magnitude of changes in the macroeconomic environment, as well as increasing geopolitical tensions,” PwC noted.