CBRE Forecasts Hotel Demand Recovery by Late 2022
After suffering the greatest performance declines in U.S. history, the nation’s hotels will likely benefit from a relatively rapid economic turnaround in 2021 and 2022, said CBRE Hotels, Atlanta.
CBRE foresees demand for U.S. lodging accommodations returning to pre-crisis levels in third-quarter 2022. But a lag in average daily rate growth could stall the recovery in revenue per available room until 2023.
“The U.S. lodging sector has been hit by two headwinds in 2020: a contraction in overall economic activity and the need for social distancing,” said CBRE Hotels Research Senior Director Jamie Lane. He said CBRE’s forecast calls for a nearly 40 percent reduction in the number of room nights occupied in 2020 compared to last year. “There is some comfort knowing that travelers will be back on the road in full force within two years,” he said.
Some analysts and hotel owners feel less optimistic. The Wall Street Journal reported last week that Richard Born, who co-owns 28 independent hotels in New York, said the city’s hotel market might not recover from the pandemic until 2024. “You layer that onto a market that already was in stress and people will start scratching their heads and start thinking about what else can I do with my real estate,” he told the Journal.
CBRE said U.S. hotel occupancy levels could fall to well below 30 percent this quarter. It forecasts a 41 percent full-year occupancy level.
As seen in prior recessions, significant drops in demand has lowered hotel pricing and revenue. STR, Hendersonville, Tenn., said the national average daily rate dropped 44 percent in April compared to a year before.
“Although the trough in 2020 lodging performance will be much deeper than anything we’ve seen in the past 80 years, much of this decline is not caused by underlying fundamental economic problems,“ said Bram Gallagher, Senior Economist with CBRE Hotels Research. “Once social gathering restrictions are lifted, an expected return to the strong underlying economic conditions that existed before 2020 will restore economic production.”