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NEW YORK - August 2, 2016 - US lodging fundamentals are decelerating and signs of fatigue are signaling a negative turn could be ahead, according to Fitch Ratings.

We had expected RevPAR to accelerate modestly during the remainder of the year. However, lodging fundamentals are softening and RevPAR growth continues to decelerate, with 2016 likely to come in below the low end of our original 4% to 5% estimate. Supply is growing but restrained by available capital.

Fitch now projects that US RevPAR will increase by 3%-4% during 2016 and by 1%-2% during 2017, with monthly comparisons possibly turning negative during the latter half of the year. We expect 2018 to mark the first full year of RevPAR declines, assuming the historical six-to-12-month lag relationship between occupancy and RevPAR declines holds. US hotel occupancy will likely end 2016 down slightly.

Weak corporate transient demand will weigh on industry growth into 2017. Consensus expectations have second-quarter 2016 earnings for the S&P 500 falling at a mid-single-digit pace, arguably telegraphing weak corporate spending trends. Indeed, many companies have enacted (nonessential) travel restrictions in response to weakening business trends. Group demand is leading the industry; however, anecdotal evidence suggests that future booking pace has slowed. Consumer transient remains the bright spot, but the strong US dollar, higher oil prices and geopolitical events could weigh on leisure travel.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=885712

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