Is the post Great Recession recovery in the U.S. hotel industry nearing an end? Investors have gotten two hints recently that the industry, which has enjoyed strong growth in occupancy and average daily rates the past two years, may be cooling. Ratings agency Fitch released a rather damning report on the industry this week citing weak U.S. economic conditions and rising capacity, which could depress average daily rates for hotel operators such as Marriott and Hyatt starting in 2017. ‘The U.S. lodging industry is in the twilight of the current upcycle – lodging fundamentals are softening and revenue per available room (RevPAR) growth is decelerating, with 2016 likely to come in at (or possibly below) the low end of our 4% to 5% estimate,’ said Fitch, adding, ‘Supply is growing, but is restrained by available capital.’ Unsurprisingly, one hotel executive tossed cold water on the assessment of the market. ‘There is no question that the cycle has peaked for us in the hotel industry, but the reality is that peak doesn’t mean things are going to decline rapidly — we think we are going to have solid years through 2018,’ said Choice Hotels International President and CEO Stephen Joyce in an interview with TheStreet. Joyce added, ‘We haven’t had the rapid supply growth that has dictated the end of other cycles.’ Meantime, the other hint of an industry slowdown has come in the form of a mixed first quarter earnings season for the hotel space headlined by moderating RevPar growth vs. 2015. At Starwood , which is in the process of being acquired by Marriott after a contentious courtship, RevPar in North America in the first quarter increased 2% after rising 5.4% in 2015. Hyatt saw its first quarter RevPar in the U.S. increase 1.7%, slowing than a 6.5% gain for all of 2015. For its part, Choice Hotels reported that domestic RevPar in the first quarter rose 1.2%, below its guidance for a 2% increase. In 2015, Choice Hotel’s domestic RevPar increase an impressive 6.5%. Occupancy fell 0.7% in the first quarter. Earnings came in at 35 cents a share, falling short of Wall Street expectations for 38 cents a share. Joyce said he is bullish on the company’s prospects for the balance of the year, citing solid levels of employment, consumer confidence and housing starts. TheStreet’s Brian Sozzi reports from New York City.
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