Analysts Downgrade Hotel Outlook

Full recovery in U.S. hotel demand and room revenue remains unlikely until 2023 and 2024, respectively, said STR, Hendersonville, Tenn., and Tourism Economics, Wayne, Pa. The firms slightly downgraded their hotel outlook report.

“Performance recovery is going to remain slow and well off of the pre-pandemic pace until the context for travel improves and group business begins to return,” said STR President Amanda Hite. To show how far levels have fallen year-over-year, she noted the 40 percent demand decrease projected for the third quarter will be a “substantial improvement” from the 57 percent decline realized during the second quarter.

“Even with a slight improvement in average daily rate projections through 2021, pricing confidence will lag an eventual rise in occupancy,” Hite said. As a result, the $32 billion gain for room revenue the firms expect to see from 2020 to 2021 would push the industry to a level that is still nearly 33 percent lower than 2019.

Tourism Economics President Adam Sacks called the economic recovery ongoing, but fragile. “COVID-19 is expected to continue to define the travel environment through the first quarter of 2021,” he said. “This sets a pace of tempered, cautious recovery in travel activity in the near term, with much stronger growth anticipated in the second half of next year.”

In a separate hotel outlook report, Fitch Ratings, New York, said it expects 2020 U.S. revenue per available room to fall between 40 percent and 50 percent. “Luxury/upscale segment hotels have been more affected by the pandemic and under-performed during the various stages of lockdown,” Fitch said. “Higher-end chains are often in urban locations, cater to group business and generate a larger portion of revenue from amenities and dining. These segments may be slower to recover until a vaccine and/or effective therapy becomes widely available.”

Fitch changed the shape of its 2020 RevPAR recovery expectations. “Compared with Fitch’s initial expectations, March and April results were slightly worse, driven by steeper average daily room rate declines,” the report said. “The May and June occupancy rebound was better than expected, as states engaged in various stages of reopening. However, with coronavirus cases rising more recently in several states, Fitch has elected not to revise up fourth-quarter expectations despite May/June improvement and could instead foresee a less optimistic trajectory.”