CBRE: Hotel Recovery Could Start Soon

Marriott Marquis San Diego

After facing the lowest occupancy levels since the 1930s and huge revenue and profit declines in the second quarter, the hotel sector could begin a multi-year recovery soon, said CBRE, Los Angeles.

Kalibri Labs, Rockville, Md., reported the number of occupied hotel room nights during the second quarter was 60 percent less than a year earlier. With such a dramatic decline in demand, the national occupancy level for the quarter fell to below 30 percent. Kalibri estimated 15 percent of U.S. hotels were forced to close for some portion of the three-month period.

“Fortunately for U.S. hoteliers, indicators of market recovery began to emerge during the [third] quarter,” said CBRE Hotels Research Senior Director Jamie Lane. He noted lodging demand increased 83 percent in May and June after bottoming out in April. “This mini surge in demand was fueled by leisure travelers looking to escape the bonds of home quarantine for safe and healthy rural and resort destinations,” he said.

CBRE Hotels Research projects continued improvement in U.S. lodging performance through the remainder of 2020 and beyond. It said U.S. hotel occupancy should average 39.8 percent and average daily rates should approach $105 for 2020. U.S. lodging demand could increase by a 14.1 percent compound annual growth rate over the next four years, recovering to 2019 levels by third-quarter 2023, Lane said.

CBRE said recovery patterns will likely vary by chain-scale. Occupied room nights for hotels in the upper-midscale segment could return to last year’s levels in 2022, while luxury and upper-upscale demand could lag until 2024.

“Economic, social and operational factors influence demand recovery,” said CBRE Hotels Research Senior Economist Bram Gallagher. “In the past quarter we observed geographically staggered rates of infection throughout the U.S. Therefore, CBRE forecasts an economic cycle shallower than initially anticipated, followed by a longer recovery. In turn, this has extended our forecast of recovery in lodging demand to 2023 from 2022.”

STR, Hendersonville, Tenn., reported overall hotel profitability as measured by gross operating profit per available room remained positive for a second straight month in August, “but the incremental improvements we had seen over the previous two months slowed,” said STR Assistant Director of Financial Performance Raquel Ortiz. “Even though August produced the industry’s lowest year-over-year demand decline since March, revenue was stagnant.”

Ortiz said total revenue per available room for full-service hotels was only 25 percent of what it was last August, while limited-service properties came in at 38 percent of last year’s value.