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RevPAR Growth Falls Short of Expectations at Start of Year

By all accounts, the hotel industry is strong. Demand is healthy; overall supply has been kept in check and the travel industry is continuing to grow. However, despite the positive outlook, revPAR growth in the first quarter fell short of expectations, increasing a nominal 1.5%. In addition occupancy rates remained flat in most major US markets. This waning momentum wan not expected until the end of 2019.

“Hoteliers have seen a slight drop in demand so far in the first quarter of 2019,” Kevin Berry, VP of Trigild, tells GlobeSt.com. “The first quarter of the year saw occupancy levels slightly lower than previously forecasted in most of the top markets. This is due to additional room inventory in many markets and the slowdown in travel from international travelers. Corporate and group business both are still relatively strong while the International traveler looks for travel where their money will go farther.”

The hotel market has been on a growth spurt for the last several years, and even in early 2019, ADR continued to increase, albeit at a slower pace. The combination of flat occupancy and slow ADR growth produced a less-than-desirable revPAR for the quarter. “The RevPAR growth slowdown was forecasted more for the end of this year or the first part of 2020,” says

Berry. “This slowdown is being watched closely by hoteliers, especially with the rise in operating costs including labor. Due to the flat occupancy levels and lower rate growth, many hotels are working diligently on ways to bring the occupancy into the hotel by other means than online travel agencies.  Some of these include special offers to guests that book directly on the hotel website or directly with the hotel.”

To push occupancy rates and therefore revPAR, hoteliers have refocused on incentive programs and guest experience. These have become important, especially in competing with new concepts like Airbnb. “Hotels continue to look at ways to strengthen their incentive programs and personalize the guest experience in an effort to keep the weekday corporate business strong,” says Berry. “The highest opportunity for hotels to, at a minimum, keep occupancy levels flat with the past two years, is in the group and corporate market segments.”

However, this could be difficult with new hotel product coming to market. New construction deliveries could contribute to anemic growth throughout the year. “While the addition of newly built hotels is slowing down, this new inventory will continue to affect the older properties and properties that offer fewer amenities, in rate and occupancy,” says Berry, adding that the market remains healthy. “While the first quarter of 2019 has fallen short of most forecasts, the hotel business continues to look strong—at least through the first part of 2020.”