Lodging Recovery ‘On Track’ Despite Delta Threat

The beleaguered lodging sector is continuing a slow slog to recovery as revenue per available room, or RevPAR, increases alongside occupancy upticks – but analysts predict a full recovery will likely take another three years.

Recent projections from Fitch Ratings say the sector’s RevPAR recovery “remains on track, despite the recent sharp uptrend in coronavirus infections.” The firm has raised its expectation for 2021 RevPAR to 68% of the 2019 pre-pandemic numbers, up from a  previous forecast of 62%, and says that metric should fully recovery by 2025.

Fitch forecasts assume a “stronger than expected” spring and summer leisure travel season this year, which an expected deceleration in the second half of the year as a potential rise in infections threatens fall travel plans. Lower price point and midscale properties are outpacing luxury segments, particularly since international and business travel remain stagnated.

As of July, US hotel occupancy, average daily rate and RevPAR increased nearly 30%, 10% and 40% year-over-year, respectively, “largely reversing the declines in 2020,” according to Fitch. But the success of the lower priced segments may be “unsustainable, as the spread of the Delta variant may result in renewed restrictions and lower lodging demand.”

The trailing seven-day average passenger count as of August 25 was down 23.4% over same-period 2019 numbers, according to a recent report from BTIG, and passenger counts have declined as peak leisure season hits the rearview. Average daily occupancy is above 2019 levels for the seventh straight week, however, and led by top performer Host Hotels, the hotel REIT sector outperformed, with prices up 3.6% for the week.