Hotels Should Be Back on the Up-and-Up By Late 2022

The US hospitality sector has been among the hardest hit by the coronavirus pandemic, but a new CBRE forecast presents a path forward on the return of the hotel and lodging industry.

Demand for US lodging accommodations will return to the pre-coronavirus crisis level in the third quarter of 2022, CBRE said in its latest Hotel Horizons forecast report, while revenue per available room will stall until 2023 due to a lag in average daily rate growth.

CBRE found that US hotel occupancy rates could decline to 26.2% in the second quarter of 2020 and forecast the annual occupancy rate for the year to be 41%. Luxury hotels will experience the greatest decline, with the annual occupancy rate dipping to 33.4%, while economy hotels are expected to best weather the economic crisis, with a forecasted annual occupancy rate of 46.4%.

“The US lodging sector has been hit by two headwinds in 2020: a contraction in overall economic activity and the need for social distancing,” said Jamie Lane, senior of CBRE Hotels Research, in a statement. “Accordingly, our current forecast calls for a 37% reduction in the number of room nights occupied in 2020 compared to 2019. There is some comfort knowing that travelers will be back on the road in full force within two years.”

CBRE Hotels Research senior economist Bram Gallagher said that although the current state of hotel performance was dire, it was not due to underlying economic problems, but instead due to stay-at-home orders and less travel as a result of the coronavirus pandemic.

“Once social gathering restrictions are lifted, an expected return to the strong underlying economic conditions that existed before 2020 will restore economic production,” he said in a statement.

Indeed, CBRE said that a decline in the number of new COVID-19 cases and relaxing social distancing restrictions were key to the hotel industry’s comeback—if not, RePAR to pre-coronavirus levels may take until 2025. Even if demand for US lodging returns to pre-crisis levels in 2022, it will take longer for the average daily rate to recover.

“Drive-to leisure destinations have been the first markets to show signs of recovery,” Lane said.  “When people can drive in their own car, and then go directly into their own room, they have a sense of control and safety. Hotels oriented toward group meetings will likely lag in recovery as meeting attendees get re-acclimated to being close to large numbers of people.”