The U.S. lodging industry ended 2023 at 63.0% occupancy, a slight increase over 2022’s 62.7%. Strong growth in the first quarter was offset by modest declines in the latter three quarters, as outbound international travel increased and inbound international travel remained muted, particularly from APAC sources. The group segment continued to post strong year-over-year gains; business travel also improved, albeit at a more modest pace. Overall, ADR increased by 4.3% in 2023, supported by strong growth in the first quarter of the year. ADR growth faltered in the summer months, attributable to lower leisure demand related to a shift toward outbound tourism and widespread concerns about the economic outlook. However, ADR growth rallied in the fall, averaging 3.9% in the last four months of the year. As a result, RevPAR for the year was up 4.9% from the 2022 level, surpassing 2019 levels by 13.6%.

With inflation decelerating, fears of a recession receding, and supply growth muted, the overall outlook for the hotel sector is one of modest, steady growth. Demand should continue to grow, supported by accelerating improvement in the group segment, which is the brightest component of the current outlook. Inbound international travel should also increase, offsetting the modest erosion in domestic leisure demand that is expected to continue in 2024. Nevertheless, leisure demand should remain well above pre-pandemic norms. Business travel is also anticipated to improve, although it is increasingly clear that office occupancy levels will not return to pre-pandemic levels. With hybrid work patterns the new normal, business travel is expected to be concentrated on midweek nights, to the detriment of Monday and Thursday nights. Overall, occupancy is forecast to increase modestly over the next several years. ADR levels are also subject to the divergent trends influencing demand and occupancy, compounded by continued caution related to the economic outlook.

With inflationary concerns diminishing and the prospect of reductions to the rate in 2024, the investment market is showing increased signs of life. Since the meeting in early December, clients have reported a notable increase in lender interest, along with modest improvements in interest rates and debt coverage ratios. Essentially, the ceiling in the current cycle has been established, removing that uncertainty. However, the lower level of uncertainty does not mean significant improvement in clarity, as the timing and pace of future rate reductions are not known. Moreover, although recessionary fears have diminished, the outlook for the economy as a whole remains uncertain, exacerbated by concerns related to ongoing international conflicts and the vagaries of an election year. Thus, lenders and investors are expected to remain cautious as we move through the initial months of this improving cycle.

* Although the HVI cannot tell you what a particular hotel is worth, it does provide excellent “big picture” data, indicating which market areas are experiencing positive trends, and thus may present good investment opportunities. The HVI for the U.S. is a measure of the strength of the lodging industry as a whole and, specifically, the hospitality investment market. The HVI for the various identified markets can provide a basis to evaluate and compare different geographic regions. For more insight on the limitations and applicability of the HVI, please read the message on the HVI home page by clicking on the graphic at the top of this page.

ADR, Demand, Occupancy, RevPAR, and Supply Projections:

Change In Value For Market:

United States RevPAR Change

United States RevPAR

For more information, please contact:

	Rod Clough, MAI President - Americas (He/Him) [email protected] +1 214 629-1136 (w)
	Anne Lloyd-Jones, MAI, CRE Director of Consulting & Valuation Services National Practice Leader [email protected] +1 914 772-1570 (m)
	Tanya Pierson, MAI Senior Managing Director Valuation, Market & Feasibility Consulting [email protected] +1 303 588-6558 (w)