Industry forecasts for 2016 mostly missed their marks
Industry forecasts for 2016 mostly missed their marks
09 JANUARY 2017 8:15 AM

While 2016 was another year of growth in average rate and revenue per available room, the U.S. hotel industry failed to fully meet the expectations of some forecasters. 

REPORT FROM THE U.S.—A lot of hotel owners, operators and investors in the United States approached 2016 with apprehension. They were concerned this would be the year the industry’s long post-recession upswing would finally end, and demand would soften and pricing power would diminish. As it turns out, it wasn’t, but it was close.

Others in the industry had higher hopes for the year. But a comparison of industry forecasts for 2016 and actual industry results shows that optimism also did not fully pan out. At last January’s Americas Lodging Industry Summit, presenters from STR, the parent company of Hotel News Now, predicted continued growth in industry fundamentals through 2016. STR’s forecast called for slightly higher occupancy (up 0.6% to 65.9%) and a 4.4% increase in average daily rate, resulting in a 5% hike in revenue per available room.

At the same event, presenters from PKF Hospitality Research (now CBRE Hotels’ Americas Research) were more bullish, forecasting a 5.5% increase in RevPAR based on a 5.2% increase in ADR.

In November, STR released its final projections for 2016, which showed significant weakening compared to forecasts from the beginning of the year. That report says 2016 occupancy will be flat at 65.4%, while ADR will rise 3.1% for a 3.1% increase in RevPAR. The good news is the industry has, at least through November, continued its string of consecutive months of RevPAR growth since 2010 following the conclusion of the recession. Through November, the streak is at 81 consecutive months.

Various other forecasters, industry executives and analysts made predictions for 2016. Here is how some of those forecasts lined up with realities.

Hotel stocks
Hotel stocks, including real estate investment trust stocks, did well in 2016, contrary to the outlook some hotel investment executives gave at the ALIS event.

As Jeffrey Horowitz, global head of real estate at Bank of America, said on an ALIS panel, “If you put yourself in the mindset of a public investor, you can see that hotel stocks have greater growth than GDP, but they’re slowing. That’s concerning. (Investors) worry they could lose a lot of money very quickly. Investors tend to go where the trade is working—real estate with longer-term leases, like self-storage—and they don’t care about value.”

But through November, the Baird/STR Hotel Stock Index had increased 12.3% for the year, with an 11.8% surge in November. Analysts credited, in part, the results of the presidential election for the uptick. 

“Hotel stocks experienced huge gains in November, especially after the election, as investors embraced the prospects for stronger economic growth,” said David Loeb, senior hotel research analyst and managing director at Baird. “November RevPAR growth trends were solid, potentially due to the realization of pent-up pre-election demand, and hotel stock valuations today are pricing in a much lower probability of slower or slowing RevPAR growth in 2017.”

Hotel REITs also outperformed many stock classes in 2016. According to Canaccord Genuity, hotel REITs have been the second best performing subsector of REIT stocks, up 16% versus the RMZ index, which is up 1% year to date. 

Hotel lenders participating in a survey early in the year said they expected hotel values to peak within the coming year, and their predictions generally held true. While participants in the Hotel Lender Survey believed as much or more debit financing would be available to owners in 2016, 45% of them said increases in hotel values would begin to moderate during the year. 

According to the Penn State Index of U.S. Hotel Values, values have risen 6.1% this year, following increases of 6.7% in 2014 and 6.4% in 2015. Values of independent properties have increased the most in 2016 (+10.2%), followed by upper midscale hotels at 6.4%. Values of upscale hotels had the lowest growth (+3.9%) this year.

For 2017, the Index predicts overall hotel values will rise 5.5%.

Group business
Early in the year, brand companies were bullish on their outlooks for group business, an optimism that generally proved to be on target. During a February call with equity analysts, Marriott International CEO Arne Sorenson said group revenue booking pace for the full year was up 7% for 2016 and 8% for 2017. He said higher demand and limited hotel meeting space in desirable locations meant groups were booking earlier.

In October, Sorenson affirmed his projections, telling analysts that North American company-operated group RevPAR had increased 7%, and in the third quarter the combined sales organizations of Marriott and the recently acquired Starwood Hotels & Resorts Worldwide had booked 3.6 million total roomnights for future periods.

Hilton Worldwide Holdings reported similar results for group business. Speaking to analysts in February, CEO Chris Nassetta said, “Group pace has been good at the end of last year (2015) and into the beginning of this year, and the group position for the year is in the mid-single digits.” 

During an October call with analysts, EVP and CFO Kevin Jacobs said strong group business had helped company-owned properties in the Americas drive higher food-and-beverage sales, which were up nearly 7% over the previous year, with an 11% increase in banquet revenues.

Sharing economy
One constant topic of discussion throughout 2016 has been the effect of the sharing economy, and Airbnb as a proxy for that trend, on the hotel industry. In his predictions for 2016, Jan Freitag, SVP for lodging insights at STR, said Airbnb would in 2016 further cement its place in the accommodations industry.

While it’s been an up-and-down year for Airbnb in its legal dealings with local jurisdictions, the site has continued to grow its business and further establish its presence in the consciousness of travelers. The company says it has nearly 3 million listings of accommodations in 34,000 cities and 191 countries. According to a report from Morgan Stanley, 19% of leisure and 18% of business travelers have used Airbnb at least once, and those numbers will grow to 25% and 23%, respectively, over the next 12 months. 

In November, Airbnb announced new initiatives aimed at helping guests maximize their travel experiences. Trips is a tours and activities planning function, while Places provides curated recommendations for restaurants, bars, events and meet-up locations near Airbnb host accommodations. The company also hinted at a future foray into booking of airlines, car rentals, restaurant reservations and more.


  • Mena April 27, 2017 6:51 AM Reply

    Thanks for sharing your ideas. The one thing is that college students have a solution between government student loan and also a private education loan where it really is easier to go with student loan online debt cosnilidatoon than through the federal education loan.

  • Mena April 27, 2017 6:51 AM Reply

    Thanks for sharing your ideas. The one thing is that college students have a solution between government student loan and also a private education loan where it really is easier to go with student loan online debt cosnilidatoon than through the federal education loan.

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.