Third quarter lodging fundamentals came in below the expectations of many, with RevPAR growth of 1.7 percent year-over-year, led by rate growth of 2.1 percent. The industry also saw third quarter lodging supply growth (1.9 percent) outpace demand (1.6 percent), resulting in occupancy decreasing 0.4 percent. September lodging results broke the industry’s 102-month streak of consecutive RevPAR gains, dropping 0.3 percent.
Demand in the Top 25 markets decreased year-over-year with a portion of this decline attributable to last year’s hurricane season effecting markets like Houston and Orlando. Group demand increased 2.5 percent in the third quarter, with growth in the transient and contract segments also remaining positive. However, supply also increased, and occupancy flattened out over the past quarter, reporting a slight decrease in group occupancy (0.1 percent) and a 0.9 percent decrease in transient occupancy. As occupancy levels stabilize, room rate growth will remain the key to RevPAR increases through the balance of this year and into next.
As we head towards 2019, economic indicators appear to support continued industry growth, given high consumer spending supported by rising disposable income, employment and household net worth. Counter-balances to continue monitoring into the new year include: continued trade tensions, waning fiscal stimulus, increasing interest rates, and growing inflation. Overall, growth in the industry is expected to continued, albeit at a slower pace.
The complete PwC Hospitality Directions report is available here.
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