Executive Summary

CBRE forecasts U.S. RevPAR growing by 1.2% in 2024, down from its earlier expectation of 2.0% growth. Despite the reduced full-year expectations, RevPAR growth is expected to improve in H2 2024, increasing by 2.0% versus just 0.5% in H1 2024.

The second-half growth expectations are underpinned by demand from U.S. election-related events; easier prior-year comparisons; more inbound international travelers; widely anticipated interest rate cuts; and a slight uptick in group and business travel. Urban and airport location hotels are set to outperform, while resort locations will continue to underperform as post-pandemic leisure travel trends normalize.

The outlook for Northern Latin America (Colombia, Costa Rica and Mexico) remains strong, with occupancy in Costa Rica this year expected to surpass its 2019 level of 67%. In Colombia, an improving economy; lower inflation, interest rate cuts; and government initiatives to bolster the hospitality sector could potentially attract more than 6 million tourists this year. Tourism in Mexico is expected to remain strong, attracting foreign investors and boosting the country’s status as a leading global tourism market.

Europe’s hotel and tourism sectors are poised for continued expansion, albeit at a more modest pace than in recent years. CBRE expects healthy growth for key European gateway cities, backed by more inbound international visitors and corporate travel. Luxury and resort locations will outperform other segments, reflecting high-income travelers’ preference for personalized experiences and reduced macroeconomic headwinds. However, after strong gains in 2023, RevPAR growth is expected to decelerate to around 5% in 2024, with the reduction primarily due to softening U.S. demand.

After continued strong growth in H1 2024, CBRE’s outlook for the Middle East's hotel and tourism industry remains positive. The first half of the year witnessed improved hotel operational performance in almost every major city across the Cooperation Council for Arab States in the Gulf (GCC). Tourism-related megaprojects were also announced in Saudi Arabia and regulatory changes in the United Arab Emirates (UAE) should bolster the hospitality sector.

Except for the Maldives, all hotel markets in Asia Pacific reported year-over-year increases in RevPAR in H1 2024. Despite ongoing challenges relating to staffing and aircraft shortages, the region has seen significant growth in airline travel so far this year.

United States

Tepid RevPAR growth continued into H1 2024, with an increase of just 0.5%. Although CBRE had expected a slowdown, growth has been more modest than anticipated, despite a resilient economy.

Headwinds such as record outbound overseas international travel; a weaker consumer; and increased competition from short-term rentals, cruise lines, and other lodging alternatives have offset the recovery in inbound international travel and modest pickup in both group and individual business travel.

Nevertheless, CBRE expects RevPAR to grow by 2.0% in H2 2024, up from 0.5% in H1 2024. Stronger momentum will be underpinned by election-related and other special events; easier prior-year growth comparisons; more inbound international travelers; and a slight uptick in both group and individual business travel demand. Given these dynamics, we expect urban and airport location hotels to outperform and resort locations to continue underperforming as return-to-office policies and pent-up demand for travel post-pandemic normalize.

On a full-year basis, CBRE forecasts RevPAR to grow by 1.2% versus an earlier expectation of 2.0%. The reduction in growth forecasts is largest for resort locations, which are now expected to experience flat year-over-year RevPAR growth, as compared with a 1.6% increase in the earlier forecast. While there is still demand for leisure travel, more Americans are vacationing in Europe and Central & Latin America and more frequently using cruise lines and short-term rentals, which continue to erode traditional hotels’ market share.

57 U.S. markets where RevPar has recovered to pre-pandemic levels
2.6% Baseline forecast for 2024 U.S. GDP growth

Through H1 2024, RevPAR in 57 of the 65 U.S. markets tracked by CBRE had recovered to pre-pandemic levels. Most of the eight markets that have yet to fully recover are in northern California and the upper Midwest. RevPAR in major markets on the East Coast such as New York, Boston, Washington DC, Atlanta, and Miami, is now above 2019's levels.

CBRE’s baseline forecast for 2024 is for GDP growth of 2.6% and average inflation of 2.9%. After stronger-than-expected GDP growth in Q2 2024, CBRE expects the expansion to slow over the back half of 2024 and into 2025. Softening consumer spending will dampen hotel demand, as will competitive threats from lodging alternatives.

Given elevated construction and financing costs, CBRE expects modest hotel supply growth of less than 1% over the next three years. Increasing global wealth and muted supply growth will support solid hotel fundamentals in the longer term. RevPAR is expected to increase at a CAGR of 2.5% over the next five years, barring a recession or exogenous shock to the global economy. Urban hotels will outperform, with RevPAR forecasted to achieve a CAGR of 3.5%, as those locations have been the slowest to recover and stand to benefit the most from inbound international travel.

Figure 1: Americas and U.S. Hotel Performance and Key Macroeconomic Indicators as a % of 2019 Levels

Source: STR, Kalibri Labs, CBRE Hotels Research, Oxford Economics, IATA, 2024.

Latin America

Northern Latin America's (Colombia, Costa Rica & Mexico) tourism sector continues to display remarkable resilience, solidifying its position as one of the key pillars of the regional economy.

Tourism in Mexico remains on a recovery trajectory, with 18.1 million international visitors arriving in the country in the year through May 2024, closing in on 2019 levels. Visitors from the U.S. accounted for 63% of arrivals, up 8.2 percentage points from the January-May 2019 period, followed by Canada with 13%, Colombia with 3% and the UK with 2%.

As of May 2024, 9.8 million international visitors so far this year stayed in hotels, a figure that is 3% higher than pre-pandemic levels. Total average occupancy in May 2024 reached 60.3%, 0.8 percentage points below 2019 levels. However, beach destinations such as Cancun, Los Cabos and Mazatlan recorded above-average occupancy of 78.2%, 76.9% and 64.8%, respectively. Tourism in Mexico is expected to remain strong, attracting foreign investors and consolidating the country’s status as a major global tourism market.

12.8% Growth in occupancy for Colombian hotels in the first four months of 2024
16.9% Growth in tourist arrivals in Costa Rica in 2023

Colombia’s tourism sector has recovered strongly from pandemic era lows. Despite a slight decrease in hotel occupancy in 2023, the sector achieved a 12.8% growth in occupancy in the first four months of 2024. The same period saw the arrival of more than 2.1 million non-resident visitors, an increase of 7.3%. The outlook for tourism this year remains positive thanks to a combination of the improving economy; lower inflation; falling interest rates; and government-led initiatives to boost tourism in the six main regions: the greater Colombian Caribbean, the eastern and western Andes region, the Colombian massif, the Pacific and the Orinoquía. This could push up visitor arrivals above 6 million for the year.

The Costa Rican tourism sector continued its strong recovery in H1 2024, surpassing expectations and solidifying its position as a key economic driver. Costa Rican Institute of Tourism data so far show sustained growth in tourist arrivals over the past 18 months, mostly from North America and Europe. Performance in 2023 was particularly impressive, with 16.9% growth in tourist arrivals and average occupancy of 65.3%, close to 2019 levels. This positive momentum continued into H1 2024, with a 14.5% increase in tourist arrivals. The outlook for the back half of 2024 is positive, with annual arrivals set to exceed 2.8 million, representing growth of 13%. Occupancy is expected to surpass 67%, exceeding pre-pandemic levels.

Figure 2: Latin American Hotel Performance and Key Macroeconomic Indicators as a % of 2019 Levels

Source: CBRE Research with information from Oxford Economics, the Central Bank of Mexico, Colombian National Administrative Department of Statistics, Colombian Ministry of Commerce, Industry and Trade, National Institute of Statistics and Census of Costa Rica and the Costa Rican Institute of Tourism, 2024.

Europe

The outlook for Europe’s hotel and tourism sector remains upbeat but RevPAR growth is set to slow to a more normalized pace. Signals of softening of U.S. consumer travel demand play into the projections, but intra-European and other global demand continues to portend for positive RevPAR growth through 2024.

Geopolitical issues will continue to affect tourism flows and prompt some travelers to shift their focus to northern and western Europe, with flight cessations also a factor. CBRE expects key gateway cities to experience healthy growth in RevPAR, driven by more international visitors and strengthened corporate travel.

Europe is expected to see more international tourist arrivals and overnight stays, which have outpaced 2019 levels so far this year. This has been driven by large sporting and entertainment events such as UEFA EURO 2024, the 2024 Summer Olympics in Paris, and a range of popular music concerts and festivals. Leisure travel will continue to outpace business travel, reflecting European consumers’ preference for focusing discretionary spending on travel and entertainment.

Tourists from the U.S. will remain a key source of hotel demand; however, travel from this market is expected to soften in the near-term, dampening hotel demand. The U.S. slowdown should be partly offset by increased long-haul travel from Asia, particularly China, as air capacity gradually recovers.

Luxury and resort properties are expected to outperform other segments, driven by high-income consumer’ preference for personalized travel experiences and lessened macroeconomic headwinds.

After enjoying strong gains in 2023, hotel operating performance is poised to moderate, with RevPAR growth expected to decelerate to around a 5% increase year over year in 2024. This marks a revision from our projection of a high single-digit increase at the beginning of the year, with the reduction primarily reflecting softening U.S. demand. Hotel operating performance across key gateway cities is projected to remain stable in 2025.

European hotel supply growth in key markets remains well below the historical trend. While the UK and Germany lead in terms of the number of rooms being added, Ireland and Poland are expected to see the biggest increase from a year ago in the hotel construction pipeline growth.

Supply and demand are expected to be in balance in France, Spain and Italy, where new hotel development is relatively low and international visitors continue to increase.

Full-year European hotel transaction volumes are expected to increase by over 10% in 2024, even though interest rate cuts have materialized more slowly than expected. Ireland and the UK have been a particular focus of hotel investment.

Continued leisure demand will attract investors to Europe’s popular tourism and resort locations, aided by improved accessibility to debt financing. Both institutional funds and private equity are expected to target acquisitions in supply-constrained markets.

One warning sign for Europe’s hotels sector is the growing backlash against high levels of tourism, particularly in popular destinations like Amsterdam, Barcelona and Venice. While the benefits of tourism are significant, we are likely to see some cities impose a moratorium on hotel development like the one recently enacted in Amsterdam. From an investment perspective, more limited hotel availability could push up room rates and consequently, the value of existing properties. At the same time, some tourism demand may shift from traditional hotspots to less crowded and more welcoming destinations, creating new opportunities for investors.

Figure 3: European Hotel Performance and Key Macroeconomic Indicators as a % of 2019 Levels

Source: STR, Oxford Economics, IATA, 2024.

Middle East

The Middle East's hotel and tourism sectors continued to exhibit strong growth in H1 2024, bolstering CBRE’s positive outlook for the year.

The first half of the year witnessed improved hotel operational performance in almost every major city across the GCC. Regulatory changes in the UAE and continued announcements of tourism-related megaprojects in Saudi Arabia will underpin performance in the short to medium-term.

Wynn’s 2022 announcement of the Wynn Al Marjan Island integrated resort in the UAE has proven to be a key milestone for the regional hotel market. Envisaged to be the first official gaming establishment in the GCC, it will not only stimulate visitation, but further diversify the emirates’ demand base, making the UAE less susceptible to exogenous demand shocks. Over the past two years, authorities have been formalizing the regulatory framework under which gaming will operate in the region. Positive developments have been seen, such as the establishment of the General Commercial Gaming Regulatory Authority in 2023, followed by various legislative announcements in 2024.

The UAE's hospitality sector showed substantial growth in H1 2024. Dubai recorded a 9.9% year-over-year increase in international visitors, which rose to 8.12 million; Abu Dhabi reported 21.4% year-over-year growth in hotel guests, which reached a total of 2.18 million. Hotel performance has been solid, with H1 2024 occupancy and RevPAR in the UAE standing at 5% and 30% above H1 2019 levels, respectively.

21.4% Year-over-year growth in hotel guests in Abu Dhabi
9.9% Year-over-year increase in international visitors in Dubai

Saudi Arabia’s tourism sector is undergoing rapid transformation as the Public Investment Fund (PIF) and its subsidiaries continue to launch new initiatives. Given that each PIF entity has a strong brand identity and key elements of differentiation, CBRE expects to see the inbound leisure segment evolve dramatically from its current state as these developments come to market.

Beyond these factors, the country has secured numerous high-profile events that will boost tourism and hotel demand over the coming decade. These include the 2029 Asian Winter Games, Expo 2030, and the 2034 FIFA World Cup.

Hotel occupancy in Saudi Arabia now stands 3.8 percentage points above the H1 2019 level. RevPAR has grown even more vigorously, up 44% over the same period. These numbers are expected to rise further as the public and private sectors collaborate to transform the country’s tourism landscape.

Figure 4: Middle Eastern Hotel Performance and Key Macroeconomic Indicators as a % of 2019 Levels

Source: STR, Oxford Economics, IATA, 2024.

Asia Pacific

Except for the Maldives, all markets in the region achieved RevPAR growth as of mid-year 2024.

With ADRs remaining mostly stable across the region, RevPAR growth has been driven by an 80bps increase in average occupancy levels so far in 2024. However, there is still room for growth, with average occupancy levels still about 370bps below the average set in 2019.

12.1% Estimated increase in Asia Pacific total passenger count in 2025
46% Estimated Asia Pacific global traveller share by 2043

Despite ongoing challenges relating to staffing and aircraft shortages, Asia Pacific has seen significant growth in air travel. The International Air Transport Association (IATA) estimated that total passenger count in Asia Pacific would increase 17.4% in 2024, and 12.1% in 2025. Asia Pacific is now the largest demand base for airlines globally, accounting for approximately 34% of all travelers worldwide this year. By 2043, IATA estimates that the region’s share will increase to more than 46%.

Mainland Chinese tourists have returned in great numbers to markets such as Japan, Korea, and Southeast Asia. Visa-free entry and weaker currencies are playing a role in stimulating this travel.

Bloomberg Intelligence expects international outbound air travel from mainland China to reach about 90% of 2019 levels by the end of the year, and to reach pre-pandemic levels by the end of 2025.

Figure 5: Asia Pacific Hotel Performance and Key Macroeconomic Indicators as a % of 2019 Levels

Source: STR, Oxford Economics, IATAOxford Economics, IATA Economics, IATA, 2024.