Top-line metrics showed a rosier picture for U.S. hotel industry
recovery than an inflation-adjusted reality, according to STR, but there’s
little downside for hotels for 2022, no matter how you look at the numbers.
STR now expects nominal revenue per available room, which is
not adjusted for inflation, to surpass pre-pandemic levels this year.
Previously, the firm predicted nominal RevPAR would catch up to 2019 levels in
2023.
As has been the pattern in the past year, room rate—rather than
occupancy—is accelerating the RevPAR recovery. The hospitality industry data
firm predicted average daily rate will track $14 higher than 2019 levels by the
end of 2022. That’s $11 more than what the firm predicted in January, and a
number that STR president Amanda Hite called “pretty conservative” when presenting
the data at the NYU International Hospitality Industry Investment Conference on
Monday.
“You can bank on that number,” said Hite, “just based on
what we’ve [seen] in the first five months of 2022.”
When adjusted for inflation, full ADR and RevPAR recovery are
not projected until 2024—a technicality that likely concerns hotel owners and
investors more than it does corporate travel buyers or anyone managing corporate
travel budgets and negotiations into the foreseeable future.
Recovery Remains a Patchwork
STR data predicted lingering asymmetry in the overall industry
recovery, both in the firm’s Top 25 Markets but also—and especially—in STR’s Central
Business District submarkets, which could be a key detail for business travel
buyers.
Hite highlighted 41 percent of all
U.S. hotels are achieving pre-covid ADR levels on an inflation-adjusted basis,
while 17 percent of hotels in the country still have negative ADR growth
compared to 2019 and are operating as a drag on ADR for the overall industry.
Per submarket, Central Business
District hotels are the laggards in terms of recovery, with “real” RevPAR not
expected to return to pre-covid levels until after 2024. Most CBDs rely on
active business travel, which the industry tracks as weekday traffic and which
has shown the weakest recovery to date but is now showing signs of life, according
to Hite.
“The area where we have the biggest gap to our 2019 performance
levels is weekday demand,” she said. “We have seen in the last few months business
travel start to pick up, so our index to 2019 performance for year-to-date this
year is at 90… that is representative of that business travel and group demand
starting to come back.”
STR’s Top 25 markets have also
shown slower recovery than the whole. As a unit, they are not expected to
achieve real RevPAR recovery to 2019 levels until 2024. That said, markets like
Nashville and Tampa have surpassed that goal, and five other markets in STR’s
Top 25 have achieved pre-pandemic performance levels, while hardest hit cities
like San Francisco and San Jose continue to struggle.
Recovery is strongest for hotels
outside these subsegments—in more suburban and remote areas like Maine and the
Florida Keys, which Hite singled out as the highest performers. By chain
segment, Hite also noted economy hotels had outperformed with “a ton of growth”
in both RevPAR and ADR.
New Travel Patterns Demand New
Hotel Offerings
Hite—and a number of CEOs speaking
at the NYU conference—remarked on a significant shift in travel patterns since
the pandemic, driven largely by remote workers. Hite noted the strong recovery
of Thursday and Sunday travel, which she characterized as “spillover” travel
from “bleisure” or “workation” trips that now span across the weekend and into
what are traditionally considered “business travel” days.
Hotel executives noted the same
shift. “Thursday and Sunday used to be the redheaded stepchildren, but now they
are coming back faster than Monday, Tuesday and Wednesday,” said Marriott CEO
Tony Capuano. He predicted it was more than a trend and represented a durable
paradigm that would demand new models from hoteliers.
“That blended purpose [trip]—I think
it is here to stay way beyond the pandemic. But someone combining biz and
leisure travel have different and evolving expectations during their stay about
wellness opportunities and food and beverage programming. That’s good news for
our business but we have to be deliberate about how we evolve our model.”