Strong international and group travel demand will drive domestic hotel yield growth in 2024, leading to positive investment fundamentals, hospitality-focused investment firm Newbond Holdings forecasts.
Ian Gaum, a partner at the New York City-based firm, told Hotel Dive that he expects “healthy and broad RevPAR growth in 2024” as well as occupancy “closer to pre-pandemic levels.” reinforced by strong transitory and group demand.
“Major major urban markets,” such as Boston, New York and Washington, DC, Gaum said, are benefiting from a rapid recovery in group and corporate demand and will continue to do so through 2024.
Growing demand for the group
Despite a post-pandemic drop in demand due to a slower recovery in city event and convention calendars, office occupancy and business travel, major urban markets “benefit now of a faster recovery in these areas and should continue to outperform next year.” Gaum said.
This is the case in Dallas, where business travel is fueling a boom in visitors, according to local hospitality experts, including Brian Nordahl, EVP and Texas Region Leader of CBRE Hotels Institutional Group. Nordahl previously told Hotel Dive that Dallas is experiencing a resurgence in business travel driven in part by several major corporate office relocations.
Additionally, Visit Dallas President and CEO Craig Davis told Hotel Dive in November that the city’s hotel revenue growth is largely driven by the recovery of meetings and events.
In October, Dallas had the highest total RevPAR growth than any other US market, according to a CoStar report. The report also confirms this New York City led other markets in gross operating profit per available room that month, reinforced by the group’s increase in demand.
International visit
In addition to recovering business and group travel, U.S. hotels will also benefit from increased international visitors in 2024, Gaum predicted.
CBRE shared a similar prediction in its 2024 US housing market outlook, saying the Los Angeles hotel industry in particular will see more visitors from Asia and a boost from the end of Hollywood’s entertainment boom. CBRE, however, expects US hotel yield growth to be less robust throughout the year, as a result of competition from alternative sources of accommodation and a slower economy.
Through secondary urban markets such as Nashville, Tennessee; Tampa, Florida; and Denver, Gaum predicts strong yield growth as a result of “the strength of migration trends, institutional investment and other prominent business and leisure demand drivers.”
Investment prospects
Gaum noted that growth in US hotel output will create an ideal environment for investment in 2024, although this will not be without its challenges.
“Our conversations with partners, lenders, brokers and peers suggest that investors are still anxious and that capital is actively looking to invest in hotels, but higher interest rates and slower growth have caused investors to pause,” he said, adding that the maturities of the loans, postponed. Plans to improve brand ownership, fund expiration, improved performance and appropriate expectations should “lead to a more normalized transaction environment over the next two years.”
Looking ahead to 2024, Newbond Holdings is particularly focused on luxury and luxury hotel investments in key urban and tourism markets, Gaum shared. The company’s strategy aligns with that of others a growing luxury and lifestyle space.
