U.S. hotel demand and average daily rate on a nominal basis will near full recovery of 2019 levels in 2022, while nominal revenue per available room will fully recover by 2023, according to the latest forecast from STR and Tourism Economics, released Monday at the NYU International Hospitality Industry Investment Conference. The firms previously estimated a full RevPAR recovery by 2024.
When inflation is taken into consideration, however, real ADR and RevPAR won’t recover until 2025, STR president Amanda Hite said. She added that inflation is at its highest rate since the early 1990s, and though she expects it to start to cool in the coming months, "it will be out there all of next year," and it is built into the new forecast.
Still, ADR potency was one of the drivers of the stronger forecast. "ADR growth has been so much stronger than anticipated," Hite said. "In my time at STR, 16 years now, August was the first time we ever revised an ADR forecast up," referring to STR's upwardly revised previous forecast.
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Sustained demand also played a factor in the revised forecast. Hite said there was concern there might be a decline in demand after summer with people going back to offices, kids going back to school and the delta variant surging. "But demand stayed strong since the summer," she said. "It's been really positive to see room demand average about 93 percent of our 2019 levels."
STR and Tourism Economics now project 2021 occupancy will reach 57.1 percent compared with a 54.7 percent forecast in August. Anticipated ADR was bumped up from $115.50 to $123, while RevPAR is expected to end the year at $70 compared with a previous estimate of $63.16.
Hite added that, with leisure travel fueling the rebound, weekend demand is back at 2019 levels. Shoulder days—Sunday and Thursday—also are near 2019 levels. There is "still a ways to go on weekdays," she said, citing STR's index score for October weekday demand of 87—a score of 100 would equal 2019—"but in my book, that was really positive," because the index for Monday, Tuesday and Wednesday demand in September was only 82.
"It's a really positive sign we've started to see that group meetings and business travelers are back on the road, and certainly have the most room to grow in those segments moving forward," Hite said.
Another sign of returning group and business transient is from the upper-upscale tier, which more frequently caters to those travel segments than do most lower tiers. "Almost half of the hotels in the upper-upscale segment have occupancies of 60 percent or more," Hite said. "This is the segment that has been lagging, so it is a really encouraging sign as we move forward to 2022. … It's a big piece of the puzzle for recovery."
Further, group demand is at about 60 percent of 2019 levels. "It's coming back," Hite said. "That is the sign we were really hoping for and concerned about in October." She explained that late September through October is conference season, but some large group meetings canceled after Labor Day because of the delta variant,. "But group demand has remained consistent for the last four months at 60 percent, even with the cancellations from the delta variant."
With higher demand across all segments, rising ADRs and the high rate of inflation, Hite said that the costs for hotels to operate continue to rise, meaning pricing will be tough for corporate travel managers and meetings managers.
"Hotel owners are still digging out of a hole, not just next year but for the next four years," she said. "There is only upward pressure on rates. There are no deals at all, and it's just a function of demand. There are people willing to pay, and the business is there. There is not any way to cut any deals with hotels."
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