Full Hotel Recovery Unlikely Until 2024

STR, Hendersonville, Tenn., and Tourism Economics, Wayne, Pa., slightly upgraded their final 2020 U.S. hotel forecast, but called full recovery in revenue per available room “unlikely” until 2024.

STR President Amanda Hite said even with “encouraging” vaccine development news, the pandemic and its subsequent economic impact will continue to limit hotel demand generators into the second half of next year. “Business demand won’t return at a substantial level until caseloads are better contained, and in the meantime, recovery is going to be primarily driven by lower-tier hotels in the leisure-driven markets with outdoor offerings,” she said.

Moody’s Analytics REIS, New York, said the pandemic hit the hotel sector disproportionately hard relative to other property types, given the pandemic’s effect on travel and leisure spending, but reported most metros saw slight improvements in occupancy rates, room rates and RevPAR in the third quarter.

Overall hotel occupancy reached 66 percent in late 2019 before declining to 38 percent in second-quarter 2020. Occupancy climbed to 43 percent in the third quarter as more people traveled over the summer months, Moody’s Analytics REIS reported. Average hotel room rates equaled $128 in fourth-quarter 2019, then fell 31 percent in the second quarter 2020 to $88. Rates climbed 6.3 percent during the third quarter to $94. RevPAR fell 60 percent from $85 in late 2019 to $34 in the second quarter before rising 20 percent to $40 in the third quarter.

Tourism Economics President Adam Sacks noted the economy has entered a slower stage of recovery, “and COVID-19 will continue to shape travel conditions in coming quarters,” he said. “Assuming substantial progress is made against the virus in the first half of 2021, we anticipate travel demand will rebound strongly in the second half.”

STR and Tourism Economics forecast the hotel industry will recapture 80 percent of prior demand by the end of 2021, though RevPAR will likely be 33-plus percent lower than in 2019. They said average daily rates and revenue will follow a slower recovery timeline, putting the industry on pace for full demand recovery at the end of 2023 and a return to pre-pandemic RevPAR levels by close of 2024.