According to the latest data from commercial real estate analytics giant CoStar, spending on travel by low-income groups in the United States significantly declined in April, due to reduced savings, increased risk of credit card defaults, and the pressures of inflation.
Although high-income individuals continue to maintain their travel habits, low-income travelers have decreased their lodging bookings in the United States. To reflect the trend of slowing GDP growth and declining demand from frugal consumers, CoStar has adjusted its forecast for the year.
At the International Hotel Investment Conference hosted by New York University this Monday, CoStar revealed that in April, overall hotel room demand in the U.S. fell by 0.5% due to a decrease in demand for mid-scale and economy hotels.
Amanda Hite, President of STR, stated, "The rising cost of living has affected the travel capability of middle- and low-income families, leading to a drop in demand for budget hotels."
Specifically, in April, demand for mid-scale and economy hotels dropped by approximately 2.7% and 3.9%, respectively. At the same time, revenue per available room (a key industry metric) decreased by about 1.7% and 3%, respectively.
According to data from the Federal Reserve Bank of New York, in the first quarter of this year, U.S. debt levels increased by $184 billion, or 1.1%, bringing the total to $17.69 trillion. Compared to the end of 2019, overall borrowing levels have increased by $3.5 trillion.
Given the current market conditions, CoStar has lowered its previous forecast for the hotel industry in 2024. The company now expects the average daily room rate to increase by 2.1% this year, down from an earlier forecast of 3.1%. It's notable that room rates have already increased by 4.3% in 2023.
For revenue per available room, it is expected to grow by 2% in 2024, down from a previous forecast of 4.1%. This metric has already grown by 5% in 2023.
Regarding occupancy rates, they are expected to decline this year, from 63% in 2023 to 62.8%, which is slightly different from previous estimates. As for supply, it is expected to grow by 0.8% this year, compared to a growth rate of 0.3% in 2023.
