Hotel Revenues are predicted to continue to rise albeit at a lower pace than we have enjoyed over the recent years. Demand growth will continue to exceed new supply levels through 2019. Supply growth is expected to peak at around 2.0% in 2018 and then stabilize at the long run average of 1.9% for the next two years. The rising costs of new construction resulting from trade war tariffs and labor costs are causing new construction costs to skyrocket. The increased construction costs and rising interest rates will temper the amount of new supply helping us to avoid being overbuilt on a national level. But there are individual submarkets that are already suffering from an oversupply of new construction.
We have enjoyed eight years of demand growth and record occupancy levels making the hotel sector one of the best investments over the last decade. The party is still not over. The celebration may not be as exuberant as it has been but it will still be fun. Demand is projected to increase at 1.9% with a 2.6% gain in ADR for 2019, still very solid numbers. There is still a lot of capital both debt and equity chasing deals as the economy continues to be very robust.