The 2016 outlook for the global hotel industry is strong as favorable travel trends and stable financial policies should allow most issuers to operate within Fitch's rating sensitivities, according to Fitch Ratings. Fitch expects global RevPAR growth will modestly decelerate to a healthy 3% to 5%.
"Middle class growth in emerging markets, relaxed barriers to visitation by some important destination countries, and growing consumer preferences for experiential rather than material purchases, means hotel RevPAR growth is here to stay for another year, despite some new and familiar risks to the sector," said Stephen Boyd, director of lodging and REITs at Fitch Ratings.
The largest risks to Fitch's outlook include geopolitical events that reduce travel demand, corporate reorganizations like mergers and acquisitions, and divestitures, and an unanticipated industry downturn with severe RevPAR declines. The rapid growth in online alternative accommodation websites also warrants closer scrutiny, according to Fitch Ratings’ recent metrics.
The U.S. lodging upcycle will likely continue in 2016, even as investor sentiment checked-out this year on weak hotel share prices, modest guidance cuts and emerging competitive threats (e.g. the consolidation of online travel agencies, Airbnb). While Fitch says it doesn't foresee the upcycle unraveling in the next one to two years, it states that current hotel operating metrics warrant a healthy level of investor apprehension, as most suggest the industry has entered the twilight of this upturn.
Austerity measures and structural reforms in some European countries will likely dampen consumer spending and temper rate growth in the region, making average room rate (ARR) growth unlikely to outpace that seen in 2015, according to Fitch Ratings' research.
In Asia, China's RevPAR growth will continue to pick up as the market moves closer to equilibrium from its current oversupplied position. Double-digit increases in tourism over the next five years and improving transportation infrastructure should also support growth.
Meetings Today’s Take: Planners will need to continue to place an emphasis on strategic negotiation in 2016 to keep costs down and will likely face higher (or unchanging) hotel rates in major U.S. and international markets.
More Information and the Full Report
Fitch Ratings, Inc., is one of three nationally recognized statistical organizations designated by the U.S. Securities and Exchange Commission, alongside Moody’s and Standard & Poor’s.
The provided information was gathered from the organization’s 2016 Outlook: Global Hotels (Still Constructive on Cycle, But Cognizant of Overstaying)—login is required to view the full report.
