Lodging Demand Could Return to Pre-Pandemic Level By Late 2023
CBRE Hotels, Dallas, said U.S. lodging demand could return to its pre-pandemic level by fourth-quarter 2023.
“We are encouraged by the pace of demand growth so far in 2021, not just for hotels, but for air travel, rental cars and alternative forms of lodging, as well,” said Rachael Rothman, Head of Hotels Research & Data Analytics for CBRE. “Clearly there is a pent-up desire to get back on the road, especially for leisure travel. Anecdotally, we are seeing early signs of improvement in group travel, but the overall pace of the recovery in group travel and corporate travel is less certain at this point.”
U.S. hotel occupancy recently reached its highest level since October 2019, data firm STR reported. Occupancy reached 71 percent in July, down just 8.7 percent from 2019 levels (due to the steep, pandemic-driven performance declines of 2020, STR measures recovery against comparable time periods from 2019). Average daily room rates increased to $139.19 and revenue per available room reached $98.87, less than 8 percent below the 2019 figure.
CBRE Hotels said the strength in lodging demand should support pricing, but occupancy gains will be somewhat offset by new supply. As a result, the recovery in occupancy will likely not occur until the late 2025. The net result: the firm forecasts a return of 2019 RevPAR levels in third quarter 2024.
Rothman noted one potential “headwind” to the strengthening demand: lodging supply could increase 2.1 percent this year. Most properties that closed in 2020 have now re-opened, and delays in the delivery of furniture, fixtures and equipment, along with construction labor shortages, pushed the opening of new and renovated properties into this year.
“Local market factors increasingly are influencing the projected performance of U.S. hotels,” Rothman said. “In general, properties located in smaller, remote and resort markets suffered less and are poised to recover to pre-pandemic levels faster. On the other hand, the larger, urban, gateway markets that are more dependent on in-bound international visitors and group demand will lag in recovery.”