Forecasters at the Lodging Conference, a gathering of senior executives in the hotel industry held in Phoenix last month, predicted that 2020 will see the “tipping point” at which planners will regain the upper hand in pricing leverage at hotels in many markets.
In a hotelinteractive.com article recapping the conference, Vail Ross, senior vice president of global business development and marketing at STR, noted that hotel demand in the United States will outpace supply for the rest of this year, but added, “That story will change as we move into 2020, where we will see that tipping point of the supply and demand relationship.”
Why? The main reason is the ongoing boom in new hotels and expansions of existing properties. Ross said there are currently 207,000 rooms under construction in the U.S. “That is up 10 percent from where we were this time last year. We’ve opened a little more than 690 hotels year-to-date and that represents a little more than 77,000 rooms,” she stated.
Vail’s assessment was echoed by other expert observers. JP Ford, senior vice president and director of global business development for Lodging Econometrics, said hotel room supply will expand by 2.2 percent this year. “And there’s much more ahead in 2020 and 2021,” he noted.
Another expert, Mark Woodworth, senior managing director and head of lodging research for CBRE, said some markets are already seeing a slowing of ADR (Average Daily Rate, a measure of how much hotels are charging per room). “One of the things that is in fact impeding ADR growth is the supply change we’re seeing in a number of markets” he said. “In 25 of the 60 [top markets], we’re calling for an average supply growth of 3.9 percent.” In markets where fewer new hotel rooms are available, he said, hoteliers will be more able to maintain or increase prices.