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Healthy economic momentum and elevated consumer confidence boost travel expectations for 2018
Research - SEPTEMBER 19, 2018

Healthy economic momentum and elevated consumer confidence boost travel expectations for 2018

by Andrea Zander

Rising travel predictions favor hotel sector, according to Marcus & Millichap’s third quarter 2018 report.

Healthy economic momentum and elevated consumer confidence levels have boosted travel expectations for 2018. Summer travel, in particular, is expected to rise 6 percent from last year and the majority of these trips will be to domestic destinations. Rising travel should reinforce hotel occupancy, which remains at a more than 30-year record high.

Travelers are increasingly seeking hotels in suburban areas and smaller metros/towns. Occupancy in both locations has picked up considerably in the past 12 months after holding relatively steady in the prior year. Many local tourism offices are working vigilantly to lure tourists to these destinations.

Rising room demand in many of the nation’s smaller markets continues to drive buyer interest in these areas. Properties in the Southwest and Carolinas regions were increasingly targeted during the past four quarters, with transactions rising 51 percent and 23 percent, respectively. In the Southwest region, demand picked up considerably throughout Arizona and New Mexico during the past 12 months.

The first half of 2018 supported an 80-basis-point increase in occupancy from the same period last year. The healthy increase in the rate supported a 60-ba­sis-point increase in annual occupancy during the past 12 months to 66.3 percent in June.

All chain scales recorded occupancy increases during the past four quarters. Independent, luxury and midscale hotels led increases, with occupancy rates rising 80 basis points in each segment. Luxury hotels had the highest occupancy overall at 74.6 percent.

Demand picked up considerably for resorts. Occupancy in these hotels jumped 100 basis points during the prior 12-month period to 70.1 percent in June. Occupancy in Florida, a popular state for visitors staying in resorts, surged 200 basis points during this time to 74.2 percent.

Occupancy in smaller metros and towns picked up notably during the past four quarters. Here, occupancy advanced 90 basis points during this time to 57.6 percent following a 20-basis-point increase in the prior year

During the year ending in the second quarter, transaction velocity nationwide picked up 4 percent from last year. Increased competition for hotels and rising revenues elevated property values 6.8 percent during this same time to $107,700 per room on average.

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