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Results for the first quarter of 2023 are expected to be high for hotel companies

While the global economy is experiencing a slowdown in inflation, as measured by the consumer price index, ADR growth has also slowed. In the first quarter of 2022, the average exchange rate increased by 38.3%.

Blog / News / 2023 May 03, 2023

US hotel revenue, as measured by room availability, rose 16.7% in the first quarter from the same period in 2022. This better-than-expected result was driven by a steady increase in average daily room rates of more than 10.2% year-on-year.

However, the performance of the sector is expected to decline sharply in 2023, which is closely related to the expected recession. CoStar's annual RevPAR projections for the hospitality industry show annual RevPAR growth of just 3.7% for all of 2023.

While the global economy is experiencing a slowdown in inflation, as measured by the consumer price index, ADR growth has also slowed. In the first quarter of 2022, the average exchange rate increased by 38.3%.

The growth rate of the high-end hotel market has slowed significantly. For the full year 2022, luxury RevPAR grew 12% year-on-year, but this slowed to just 1.2% year-on-year in the first quarter. The sharp slowdown can be attributed to many different factors. Luxury hotel prices have risen after emerging from the recession, and operators expect growth to return to normal soon.

With the global pandemic ending in the United States, many high-end travellers can safely return overseas and spend their money elsewhere. In addition, demand for business travel and group assistance continues to increase, and the average price for the first quarter includes these lower negotiated rates. In contrast, a year ago, the rise in luxury prices was driven almost entirely by rising leisure prices.

On the other hand, luxury hotels, often located in urban areas, with ample meeting space and comprehensive catering services, benefit from the return of business travellers. The RevPAR of hotels in this category increased by 28.3% year-on-year during the first quarter. The largest shortfall occurred in luxury hotels, which were unable to offset 2019 results. However, despite strong quarterly RevPAR growth, pre-pandemic occupancy results remain elusive as the employment rates remain low for almost six months. It refers to the results of the first quarter of 2019.

The pipeline numbers were not significantly changed during the quarter or the year. With about 150,000 rooms under construction, that number may shrink as regional banks may reconsider their exposure to homebuilding. This will increase the number of rooms in the final planning stage and reduce the number of hotel rooms under construction.

Transaction volume in the first quarter fell sharply to $7 billion from more than $15 billion in the fourth quarter of 2022. As in the construction sector, a slowdown in hotel lending could create more uncertainty for to hoteliers and hoteliers and possibly problems with future sales this year. As one industry participant noted, “If you're not selling today, you're not selling.

With expectations of a recession and the possibility of the Federal Reserve raising interest rates again, players in the hospitality industry are bracing for a slowdown next year. But if 2020's performance is anything to go by, it's that American tourists' appetite for travel can't be underestimated. As a result, hotel demand growth and ADR prices are expected to slow but not significantly worse.



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