Outperformance in the cruise sector will mitigate the slowing growth in lodging earnings,resulting in a slower but still healthy growth rate for the US lodging and cruise industry in 2016, says Moody’s Investors Service.
As a result, the rating agency maintains its positive outlook on the industry, with a forecast for EBITDA growth of 7%-8% over the next 12-18 months underpinned by strong EBITDA growth in the cruise industry.
Through Q2 2015, EBITDA growth in the cruise industry increased 18% year over year, and should continue to grow at a healthy 12%-13% in 2016 as a result of lower fuel prices and an increasing supply of new, more fuel-efficient ships.
EBITDA growth in the lodging industry has slowed, but remains in line with Moody’s forecast for 2015.
“Our expectation for demand growth of 2.0%-2.5% in 2016 and modest occupancy growth should result in solid growth in average daily room rates,” said Margaret Taylor, a Moody’s Senior Vice President. Moody’s expects average daily room rates to grow 4.5% to 5.5% in 2016, and revenue per available room (RevPAR) to grow 5.5% to 6.5% over the same timeframe. “RevPar is highly correlated to EBITDA growth, which we expect to grow 4%-5% in 2016,” added Taylor.
The factors influencing growth in the lodging industry include a sizable pipeline of new hotels slated to open amid slowing demand, which will pressure industry fundamentals.
“We believe that supply and demand growth will begin to reach parity in 2016, signaling that growth will be modest in 2017,” said Taylor. “However, combined with strong performance in the cruise sector, overall growth in the lodging and cruise industry will remain healthy.”