CBRE Hotels Research now expects 2020 U.S. industrywide hotel revenue per available room to decline 46 percent year over year, with a second-quarter contraction of almost 80 percent, according to a revised hotel performance forecast for 2020 released this week. The annual RevPAR projection is down from its March 24 prediction of a 36.9 percent decline, and a 0.1 percent decline forecast prior to the spread of the coronavirus.
CBRE Hotels Research has been analyzing the impact of Covid-19 since January, and "as the forecast updates have progressed, the magnitude of the projected declines in RevPAR have surpassed anything our firm has seen while tracking U.S. hotel performance the past 90 years," wrote director of research information services Robert Mandelbaum. "Based on CBRE's annual Trends in the Hotel Industry survey of U.S. hotel operating statements, the previous greatest annual decline in RevPAR occurred in 1932 when the Trends sample suffered a RevPAR decrease of 24.7 percent."
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Coming off its highs of 66.1 percent in each of the past two years, occupancy levels are expected to bottom out at 23.3 percent during the second quarter, while occupancy for the year is expected to be just 42.6 percent, down from the 46.8 percent projected in March. "To put this in perspective, the lowest annual occupancy level ever achieved by the CBRE Trends sample was 44.5 percent in 1933," Mandelbaum continued.
Still, CBRE expects that as early as the third quarter of 2020, activity will begin to stabilize, with a recovery anticipated to be underway by the fourth quarter, according to the latest outlook. As governments offer monetary relief to try to prevent a long-term global recession, CBRE expects that stimulus coupled with pent-up demand will result in a "substantial rebound in economic activity in 2021."
If the outbreak subsides and governments allow people to travel again by the third quarter, the company expects a recovery first for drive-to leisure destinations and then corporate transient demand. "It could be significantly longer for international and group demand to return to pre-Covid-19 levels. [The] outlook shows that RevPAR will recover to 2019 levels by 2023, but not before losing nearly $100 billion in rooms revenue alone by 2022 based on pre-Covid-19 forecasts."