U.S. hotel sector revenue growth will decelerate as further recovery in occupancy rates is balanced with lower ADR due to a demand shift away from high-priced leisure stays and toward more business group and transient travel, said Fitch Ratings.

“Our base ratings case expectations generally assume U.S. RevPAR growth of approximately 5%-6% in 2023 and 0%-2% in 2024, with notable outperformance from the upper upscale and upscale hotels,” Fitch reported. It added that asset-light brand owner/operators are better positioned relative to hotel owners over the one-to-two year Rating Outlook horizon, thanks to broadly diversified portfolios and lower fixed costs.

As U.S. consumer spending weakens into 2024, “we see downside risk to hotel sector fundamentals from a normalization in leisure rates, coupled with slower U.S. economic growth,” the rating agency said in a note. “Positively, we expect hotel room supply growth to remain below the long-term historical average of roughly 2% for the next two years, and possibly longer, given challenging borrowing conditions and depressed hotel values in key, large urban markets.”