Declining occupancy levels and softening demand have led PwC to soften its hotel outlook for 2023 and 2024, according to the consultancy's new Hospitality Directions US report. This fall's increases in individual business travel and group business have yet to offset the slowed leisure demand, according to the report, which shows seven consecutive months of year-over-year occupancy drops. For the remainder of this year and into 2024, PwC expects economic headwinds and geopolitical tensions to play a role, as well, in slightly reduced expectations.
It should be noted that while leisure demand is still strong, it has cooled from the post-pandemic, sky-high levels it was hitting last year. Room-rate growth likewise slowed during the second quarter and subsequently fell to below inflationary growth in Q3. However, average daily rate is expected to increase again in the fourth quarter and into next year, and once again serve as the primary driver of lodging revenue.
Occupancy is expected to be essentially flat, rising 0.7 percent to 63 percent this year. That's slightly off PwC's projection last spring, which called for occupancy to hit 63.4 percent in 2023. The company foresees demand growth to continue to be sluggish through the first half of 2024 before gradually increasing in the second half, driving occupancy up a notch to 63.2 percent next year.
Average daily rate is expected to outperform previous projections, rising 4.5 percent this year to $155.92. That exceeds last spring's forecast of a 4.1 percent hike, and represents about 114 percent of prepandemic levels. Growth in ADR is expected then to decelerate through 2024, resulting in a 2.4 percent year-over-year increase. Revenue per available room now is expected to increase 5.2 percent in 2023, slowing to a 2.7 percent rise in 2024.
A look at the outlook based on chain scale reveals the expected strength of group and business travel, with demand disproportionately higher in the upper upscale segment, followed by luxury. That could be affected adversely by increasing global tensions and macroeconomic factors, the report points out.
