BOSTON– CBRE’s forecasts for RevPAR in Boston to increase by 0.3 percent in 2019, decrease 1.3 percent in 2020, and increase 0.3 percent in 2021, according to CBRE Hotels Research’s September 2019 Hotel Horizons report.
CBRE is projecting a 3.8 percent supply increase and 2.1 percent demand increase in Boston for 2019. In 2020 supply is expected to increase 6.2 percent and demand is expected to increase 4.7 percent. Average daily rates (ADR) are also projected to climb in Boston; rates are projected to grow 1.9 percent in 2019 and 0.2 percent in 2020. Occupancy is expected to decline by 1.6 percent and 1.4 percent in 2019 and 2020, respectively.
“Boston’s supply and demand continue to grow in both the lower- and upper-priced services through 2021,” said Mark VanStekelenburg, managing director of CBRE Hotels. “Specifically, in the CBD, lower-priced supply is seeing significant growth. Of the approximate 2,500 rooms under construction, roughly 500 are considered lower-priced, or 20 percent. The CBD itself is currently only 10 percent lower-priced. The significant growth in lower-priced supply in the CBD submarket partly contributes to the slower ADR growth rates projected for the greater market.”
CBRE projects GDP growth to average 1.9 percent during the second half of 2019. This is half the pace of growth during the first half of the year. Accordingly, CBRE Hotels Research forecasts a deceleration in U.S. lodging performance during the final six months of 2019. After rising by 2.1 percent during the first half of the year, the pace of demand growth will slow to 1.4 percent for the balance of 2019. As a result, CBRE now forecasts the national occupancy level to decline by 0.2 percent from 2018 to 2019.
Challenge To Grow Profits
While the economy continues to support revenue growth, the ability to achieve greater profits will be difficult. With forecast revenue increases hovering around one percent, hotel operators will need to keep expense growth under 2 percent to achieve nominal gains in Gross Operating Profits. This will be a challenge given that expenses have averaged 4 percent annual growth over the long run, and the labor market is tight.
The September 2019 edition of Hotel Horizons® for the U.S. lodging industry and 60 major markets can be purchased by visiting: https://pip.cbrehotels.com
CBRE Hotels is a specialized advisory group within CBRE providing capital markets, consulting, investment sales, research and valuation services to companies in the hotel sector. CBRE Hotels is comprised of more than 385 dedicated hospitality professionals located in 60 offices across the globe.