Drumroll, please. The Global Business Consulting (GBC) team at American Express Global Business Travel has just released its 2019 predictions for hotels in 150 cities (as well as a “Smarter Buying” guide to assist travel and procurement managers during the RFP process).
To arrive at our hotel projections, GBC first combed through information pulled from our vast data lake, reviewing aggregated transaction data from over the last five years to understand market dynamics on a city level. We then augmented the data set with macroeconomic variables from the International Monetary Fund (IMF) and broader industry metrics from hotel data specialist STR. To boost accuracy even more, we also employed a “residual variation” approach, including only those variables with the biggest impact to avoid “overfitting.” In other words, we take our forecasting work very seriously!
You may access our 2019 Hotel Monitor and Hotel City Predictions reports below. But first, here’s a glimpse of some of the regional trends we’re predicting for the upcoming year.
Following a 10-year high in 2017, Europe is expected to see its GDP growth slip back to 2 percent in 2019, according to a report released by the European Commission.
Despite this drop, hotel rates are expected to climb across the continent. Limited supply growth in most European markets combined with steady demand growth helped boost occupancy and room rates in 2017, and there is little indication this will change for most of Europe in the next few years, based on our findings.
One exception is London, where rates are expected to remain stagnant and where there is a concern that Brexit may make it difficult for hotels to find adequate staffing.
In Ireland, we anticipate prices to soar, with a 7 percent increase in Dublin. We’re also predicting a 6 percent hike in Paris, Lisbon and Luxembourg.
While the Organisation for Economic Co-operation and Development predicts that the United States’ GDP will rise by nearly 3 percent in 2019, concerns over some of the country’s policies have impacted inbound travel with international arrivals to the U.S. down 4 percent in the first three quarters of 2017, according to a report by Reuters. Potential changes to NAFTA could impact travel and trade further. Despite this, rate increases are expected to rise in major cities, including New York (3 percent), Chicago (6 percent) and San Francisco (4 percent).
The economic outlook in Latin America is tightly connected to China, whose economy is decelerating, and to the U.S., whose trade and fiscal policies may impact inbound travelers to Latin American countries.
Yet, we’re seeing strong hotel revenue growth in Brazil as it emerges from a historically deep recession, and in April 2018, the country recorded its eighth consecutive month of occupancy growth, according to a report by Hotel News Resource.
We believe Argentina will have the highest hikes worldwide due to local inflation, and we’re forecasting rates will soar by 21 percent in Buenos Aires in 2019. But because our predictions are based on local currencies, it’s a different story when converted to U.S. dollars or euros.
With the IMF predicting 3 percent GDP growth for Mexico, hotel demand (and thus prices) likely will rise there, too.
While the steady rise in copper prices has made Chile’s economy very strong, this is the only Latin American country where we believe hotel rates will not climb.
Demand continues to rise across Asia Pacific (APAC), which is creating a changing travel dynamic across the region. New hotel builds are keeping pace with increased demand, which will keep rates favorable to buyers in most locations. However, room availability, particularly in popular locations such as Singapore, Hong Kong, Sydney, Tokyo and Bangkok, can be a challenge.
According to a market report by Hotel News Now, demand in India is increasing and recent trends in foreign tourist arrivals, foreign exchange earnings growth and improving domestic macroeconomic data will cause average room rates to escalate across most regions.
In China, more interesting than the minor 1 percent rise we’re projecting is how guests are actually paying for their rooms. Mobile payment solutions have been shaking up the hospitality sector there. According to a recent Skift article, Marriott has rolled out Alipay mobile payments at close to a quarter of its properties globally to entice Chinese consumers.
The Middle East and Africa
Continuing political uncertainty and security concerns throughout much of the Middle East and Africa are helping to drive demand for upscale properties, which travelers typically perceive as offering higher levels of security. As a result, rates for these properties are more likely to increase compared with mid-scale hotels that are more focused on domestic and inter-regional travelers.
Overall, we expect to see a drop across the Middle East, especially in Abu Dhabi and Doha, where an oversupply is pushing down prices by 6 and 13 percent, respectively.
Following a period of economic slowdown, stronger global growth and higher commodity prices are helping to push up growth projections in sub-Saharan Africa from 2.7 percent in 2017 to 3.5 percent in 2018 with further strengthening expected in 2019, according to a white paper by the IMF. However, it is unclear whether demand can match future supply increases; if not, we expect hotel prices to drop there.
For more detailed region-by-region projections and expert recommendations from GBC, download our Hotel Monitor 2019 outlook by filling out the form below and clicking on “Submit.” You then will be redirected to a new screen where you can access the report. And to view our 150-city forecast, click here.
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