CBRE U.S. Hotels State of the Union February 2024 - Short-term Rentals Continue to Take Market Share

CBRE U.S. Hotels State of the Union February 2024 Edition

Key Takeaways:

• Economy

  CBRE raised its 2024 GDP growth outlook from 1.2% to 1.6%.
  The positive GDP revision is predicated on moderating inflation, employment gains of 0.5%, and a 100 basis points (bps) reduction in interest rates.

  Wage growth continued to outpace inflation in December.
  With wage growth outpacing inflation, and airfares declining y/y, consumers have discretionary income to travel. Despite these tailwinds and low levels of personal leverage, RevPAR gains continue to fade.

  Both CMBS credit spreads and interest rates increased in December.
  December hotel CMBS borrowing rates hit 9%, up from 6.9% a year ago, and spreads were just over 500bps, up from 327 bps in 2022. 2x the loans were issued on a T3M basis, but the average loan was just $22 mil. down by more than 50% y/y.

• Current Trends

  Short-term rentals continue to take market share.
  Hotel demand fell 1.6% in December, while short-term rental demand rose 4.3%. STR’s now represent roughly 18.6% of industry-wide market share, up from 15.2% prior to the pandemic.

  Outbound international travel continued to outpace inbound travel.
  Outbound international travel was 114% of 2019’s level in December. This compares to inbound at just 88%. The persistent spread has led to occupancy headwinds, particularly in some West Coast markets.

  TSA throughput continues to post gains over 2019.
  Full-year 2023 TSA through put was 101% of 2019, increasing 12.4% y/y. In January, TSA throughput increased an additional 9.9% y/y, reaching 104% of 2019. Lower airfares have led to a full recovery in air travel.

• Food for Thought

  December RevPAR declined 1.1% for all chain scales.
  ADR gains of 1.3% only partially offset the 2.4% decrease in sum of chains occupancy. Lower and middle price tiers declined, but Luxury and Upper Upscale were slightly positive. Urban hotels posted slightly positive RevPAR during the month, up 0.2%.

  Direct bookings continued to take share in Q4 2023.
  Demand for Brand.com improved by 2.2% during the quarter, while OTA demand fell by 2.0%. Corporate demand growth outpaced group, rising 4.6% compared with a 0.1% decrease. Demand in both channels is within 5 p.p. of 2019.

  GOP margins declined in November, but profit growth was slightly positive.
  November’s total revenue growth of 2.4% more than offset the 0.5 percentage point contraction in margins, resulting in an 0.9% increase in profit dollars.

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