LW Hotel Advisors (LWHA) recently released its third-quarter U.S. lodging market update. According to Daniel Lesser, President and CEO, the near‐term lodging outlook appears choppy as prognosticators have downgraded projected 2020 national hotel revenue per available room (RevPAR) growth. While the United States remains in the midst of its longest uninterrupted economic expansion in modern history, slowing growth metrics along with abundant geopolitical uncertainties are heightening perceived risk of impending recession, according to Lesser.
Not everyone believes a recession is imminent, and contrarians can point to other metrics that paint a much sunnier picture. Either way, the prevailing view seems to be that when the next recession hits, it will be less severe than the last one. Through this past August the U.S. hotel industry’s expansion cycle reached 114 months, as RevPAR declined year over year only two months during this period — in August 2018 and June 2019. Generally, national hotel supply and demand growth is in equilibrium, resulting in relatively flat occupancy levels and lackluster RevPAR growth stemming from average daily rate increases barely equal to inflation (and decelerating).
America’s hotel sector has been operating at peak levels for the past three years as an expanding economy has readily absorbed accelerated supply growth in most markets. Notwithstanding rising salary and wage rates and slowing revenue growth, operators have controlled costs sufficiently to achieve GOP margins at their highest levels since the 1960s. With everything said, the near‐term lodging outlook appears choppy as prognosticators have downgraded projected 2020 national RevPAR growth.