By Amy Bostock
At the beginning of the year, experts predicted that the global hotel industry was poised for a major rebound in 2024 and 2025, moving past the impacts of COVID-19 into a period of growth. According to Kelsey Fenerty, manager of Analytics at STR, globally, most markets have now almost reached pre-pandemic demand levels and far exceeded pre-pandemic ADR and RevPAR levels; most regions anticipate continued YOY growth in RevPAR this year as well.
“Most regions are performing well year-to-date (YTD),” says Fenerty. “Occupancy growth has reverted back to ‘normal’ growth levels, and the Middle East and Asia (excluding China) reported strong YOY growth YTD. Asia Pacific (APAC) OCC (occupancy) growth is underpinned by a weaker 2023 and bigger return to travel in 2024, while Middle East OCC growth comes courtesy of the region’s continued expansion into international tourism, with Saudi Arabia a key driver as it continues to implement its Vision 2030 plan.
In terms of hotel segments, Fenerty says groups have been a major demand driver across Europe. Weekday demand — which is most frequently corporate travellers — has also been great in Europe, with weekend demand a bit softer YOY as leisure travel reverts to normal patterns. Branded hotel development is another key global theme, with luxury and upper-upscale rooms expecting the strongest growth and midscale and economy pipelines relatively light.
“Demand growth in China has been slightly slower YTD, with major markets still struggling with a slower recovery to international inbound demand. Outbound travel from China has picked up as well, although the domestic market is so strong that any impact to domestic demand as a result of increased outbound travel should be limited,” says Fenerty, adding the Middle East has been modestly hampered by regional tensions and new supply, but overall continues to grow both business and leisure demand, “with no signs of stopping as regional travel initiatives continue to progress.”
Many of the markets with the strongest pipelines are working to revamp/expand their tourism sectors. According to STR data, Saudi Arabia is an obvious frontrunner, but Vietnam and Cambodia in SEA, as well as many African countries, all have a significant number of rooms under development. “Markets with lighter pipelines tend to be geographically constrained (e.g., islands where there is limited space to build) or have high costs associated with development,” says Fenerty.
Europe
In terms of RevPAR growth, at more than five per cent, Europe has outperformed the APAC and Americas (where growth is now under three per cent) but is showing slower growth compared to the Middle East and Africa (more than nine per cent) YTD.
“We’re seeing a marked uptick in investment volumes in 2024, largely driven by the stabilization of interest rates, and this has spurred an investment revival in several key markets including the U.K., Ireland, and Italy,” says Ronald Chan, associate director, Hotels Research, Europe at CBRE Hotels, adding CBRE expects a mid-single digit increase in RevPAR this year, and a low-single digit increase next year for Europe.
Kenneth Hatton, head of CBRE Hotels, Europe, says investors will continue to target the markets with a favourable demand/supply dynamic and expects Spain, Italy and France to benefit from further growth potential, “as these countries are expected to see slower-than-average pipeline growth in the coming years alongside sustained growth in inbound tourist arrivals.”
He also notes that Greece, which experienced a record 2023 with more than 32 million overnight tourist arrivals, is expected to grow by a further nine per cent and 11 per cent year-over-year in 2024 and 2025, respectively.
Hattan cautions that the perception of over-tourism in certain markets will continue the pressure to maintain or enforce new bans on additional hotel development in cities such as Amsterdam, Barcelona and Venice, so the development environment in such markets will remain particularly challenging.
“Mixed-use developments will continue to grow in adoption as hotel operators are becoming increasingly adept at integrating with adjacent facilities,” Hatton adds. “They’re also more open to standalone branded residential projects, and we see this becoming more common.”
In terms of segments to watch, he says the ability of luxury to price well ahead of inflation has attracted a whole new category of buyers to that segment over the past two years. “At the other end of the scale, the leaner model of the rooms-led economy segment, with little-to-no staffed F&B operation, has become more attractive for its operating model. The segments in between, with full-service operations that are aimed at guests who are more price-sensitive than the luxury customer, are coming under more scrutiny.”
Mexico, the Caribbean and Central America
Juan Pedro Saenz-Diez, senior vice-president for CBRE Hotels in Mexico, the Caribbean and Central America, says Los Cabos, Cancun and Mexico City are expected to have the strongest fundamental performance in 2024. It’s estimated that 2024 will be a record year for travel and tourism in Mexico, contributing $264 billion to GDP. This figure represents an increase of almost three per cent compared to 2019 levels, generating 7.56 million jobs, equivalent to 13 per cent of total jobs in Mexico. By 2034, tourism in Mexico is expected to contribute more than $354 billion to Mexico’s GDP, representing 15.8 per cent of the national economy and providing employment to 9.3 million people.
“Los Cabos is likely to be a high-demand destination in 2024, according to investors, which is increasingly becoming a luxury market for its visitors,” says Saenz-Diez. “In this context, the Mexican and Caribbean markets continue growing, promoting the destination and improving its infrastructure with projects such as the new International Airport in Tulum and the Mayan Train.”
Apart from these three locations, he says Puerto Vallarta-Riviera Nayarit are also showing strong market fundamentals that should increase with the completion of the Guadalajara Vallarta Road and the expansion of PVR International Airport.
“We also expect an increase in small cities such as Puerto Escondido, Holbox or Todos Santos for ‘Barefoot Luxury,’ for travellers looking for trips to luxury boutique hotels with eco-friendly activities at a slower pace,” says Saenz-Diez.
“There’s strong guest demand for luxury properties in the Caribbean and Latin America region, so we’re bolstering our portfolio with our exclusive Small Luxury Hotels of the World patnership as well as planned openings like Waldorf Astoria Costa Rica Punta Cacique, opening later this year, which will be the first Waldorf Astoria branded hotel in the country,” says Bill Fortier, senior vice-president, Development, Americas, Hilton. “In the Caribbean and Latin America, we recently opened our 225th hotel this year, following a year of record room growth in 2023. We’re expecting to surpass 300 hotels trading in the region within a few years.”
Fortier says Latin America and the Caribbean are prominent growth regions for Hilton and last year the global hotel chain signed more than 35 new hotel deals, bringing its overall pipeline to 110 properties. “Mexico is Hilton’s largest operating market in the region with more than 90 hotels open and more than 30 hotels under development,” he says. “With six hotels in operation in the Dominican Republic and more than 10 in development, Hilton plans to nearly triple its footprint in the country with notable openings including the new-build, 502-room Zemi Miches All-inclusive Resort, Curio Collection by Hilton, set to open in late 2024.”
Hilton has 10 hotels and resorts in Argentina and expects to double its footprint in the coming years, “while Brazil will continue to be a top priority for our growth, with plans to introduce two new brands in the country, Homewood Suites by Hilton and Motto by Hilton.”
Middle East
The KSA (Kingdom of Saudi Arabia) market is expected to enter a five-to-six-year transitional period due to the amplification of the Saudi Vision 2030 initiative, resulting in anticipated demand growth momentum across both corporate and leisure demand segments.
According to Ali Manzoor, head of Hospitality, Hotels & Tourism in the Middle East for CBRE, the UAE market is also expected to experience increased growth. “While Dubai has historically been the regional standout, investor interest has been accelerating in other emirates as well, particularly in Ras Al Khaimah due to the associated announcements regarding gaming and the observable progress of the Wynn resort.”
Fenerty says while the Middle East has been modestly hampered by regional tensions and new supply, “overall [the region] continues to grow both business and leisure demand, with no signs of stopping as regional travel initiatives continue to progress.”
In fact, in 2023, international tourism arrivals were 149 per cent higher than in 2019, and CBRE expects strong growth to continue in the short-term with the continued delivery of key demand generators.
Asia Pacific
According to data from CBRE Hotels, all markets in the Asia-Pacific region (with the exception of Maldives) have seen increases in RevPAR performance YOY as of May 2024 YTD, with ADRs remaining mostly stable across the region.
Although airline capacity in Asia Pacific is yet to fully recover to pre-pandemic levels, CBRE forecasts that total international tourism arrivals should reach 2019 levels by the end of this year. While ADRs are expected to normalize in most markets, OCC growth in well-managed assets should drive revenue growth.
STR data shows demand growth in China has been slightly slower YTD, with major markets still struggling with a slower recovery to international inbound demand. “Outbound travel from China has picked up as well, although the domestic market is so strong that any impact to domestic demand as a result of increased outbound travel should be limited,” says Fenerty.
Henry Chin, global head of Investor Thought Leadership & head of Research, Asia Pacific at CBRE Hotels, says Mainland Chinese tourists are demonstrating a much greater level of outbound activity in 2024, with travellers returning to markets such as Japan, Korea and Southeast Asia. Visa-free entry and weaker currencies are playing pivotal roles in the return of the mainland Chinese demographic.
United States
Rachael Rothman, head of Hotels Research & Data Analytics at CBRE Hotels says “in the U.S., we’ve seen strong performance out of certain smaller markets this year, such as Cleveland, which were boosted by the eclipse. We don’t believe the trends seen in the first few months of the year are necessarily indicative of longer-term trends and instead believe they demonstrate the power of special events to boost demand and RevPAR growth.”
In terms of which markets expected to show the strongest performance over the next few quarters, she says CBRE would highlight New York City, Boston, Washington, D.C., and San Jose.
“We continue to see development focused in three areas: extended-stay hotels, branded residential — sometimes combined with a luxury resort, and traditional limited- and select-service hotels.”
Fortier says Hilton’s focused-service brands are currently leading the company’s growth in the Americas, as in much of the world. “However, we’re also focused on capitalizing on new opportunities to open hotels under our full-service, lifestyle and luxury brands. There’s clear appetite for our lifestyle brands in the Americas and, globally, it’s a segment in which we expect to double our portfolio over the next four years.”
The company recently opened its first new build Signia by Hilton property in Atlanta, and in the coming months Fortier says it will debut its first LivSmart Studios by Hilton hotel. “We also continue to focus on conversion projects for the Spark by Hilton brand across the U.S. and beyond.”
Looking ahead, Rothman says group travel remains solid and stronger urban demand trends signals continued improvement in inbound international travel, which increased 15 per cent year-over-year in June, as well as improvements in corporate travel.
