Travel and hospitality company CFOs expect 2023 revenue per available room to be further driven up by higher average daily rates and occupancy levels, despite increasing costs and labor shortages, according to a New York University survey.
The report by the NYU School of Professional Studies' Tisch Center and professional services firm Ernst & Young U.S., collected responses in May from more than 30 CFOs at “leading travel and hospitality companies,” according to NYU.
According to the report, respondents project leisure travel, group travel and business travel—in that order—will drive 2023 RevPAR performance. Approximately 47 percent of respondents said ADR alone would drive RevPAR growth this year, and the same number said ADR and occupancy together would. Less than 10 percent of respondents said occupancy alone would be a driver.
“While consumers confront higher average daily rates and even fewer amenities, which now come at a price, there still seems to be a steadily growing, pent-up demand for travel,” according to the report.
While surveyed CFOs expect RevPAR to increase, it won’t be astronomical. Nearly 60 percent said they expect their company’s 2023 RevPAR to be less than 10 percent above 2022 levels. Approximately 30 percent said it would be up 10 to 20 percent, and less than 10 percent of said it would increase 20 percent to 30 percent above 2022.
Continuing Challenges
As pent-up demand persists, so do industry concerns. When asked to list their top three economic and geopolitical environment concerns, respondents cited interest rates, the possibility of recession and the labor market, according to the report.
Even as RevPAR recovery is “exceeding expectations, labor shortages are still creating challenges for hotels,” report authors wrote.
“The hospitality industry is adapting to meet challenges by adjusting amenities, outsourcing more and increasing reliance on technology,” according to the report. Among those adaptations, 35 percent of respondents said they are raising pay to attract talent, 20 percent said they are more heavily relying on technology and 20 percent said they are adjusting amenities.
Citing inflationary concerns and increasing interest rates, respondents project hotel financial transaction activity to slow in 2023, according to the report.
“In addition to making deals more expensive, rising interest rates could boost pricing expectations for sellers, potentially putting deals out of reach for prospective buyers,” report authors wrote. Sixty-six percent of CFOs surveyed expect limited transaction activity in 2023.