Lodging demand in the United States is expected to recover to 2019 levels by the latter part of 2023, according to data presented today at STR's Hotel Data Conference, but revenue per available room and average daily rate aren't likely to bounce back to last year's levels until 2024 or later.
STR also slightly downgraded its forecast for 2020 and 2021 at the annual conference, which took place online. Plans had called for the event to be held as a hybrid conference, based in Nashville, but travel and gathering restrictions forced STR to change plans at the beginning of this month.
According to the newly updated hotel forecast, STR and Tourism Economics are now projecting a 39.7 percent year-over-year drop in occupancy for 2020, along with a 20.9 percent decrease in average daily rate, with RevPAR expected to plummet by 52.3 percent. That represents slightly steeper drops than what the June forecast called for, as global uncertainty around the pandemic persists. The metrics are expected to improve in 2021, although not enough to dig out from the drops they are taking this year. Occupancy in 2021 is projected to grow by 30.5 percent vs. 2020, with ADR inching up by 5.6 percent and RevPAR increasing by 37.9 percent.
In absolute numbers, that equates to a projected U.S. hotel occupancy this year of just 39.8 percent, bouncing back up to 52 percent occupancy in 2021. For comparison, 2019 occupancy was 66.1 percent.
Average daily rate, which was $131.13 for 2019, is forecast to be just $103.71 in 2020 and $109.56 in 2021. RevPAR is expected to free fall from last year's $86.64 down to $41.31 this year and then $56.95 in 2021.
"We had anticipated that demand recovery in the third and fourth quarter of this year would be better than what it will be," said STR president Amanda Hite in a forecast analysis at the conference. "We thought we'd be able to start opening back up and we would see some more small meetings and corporate travel happening at the end of the third quarter, start of the fourth quarter this year. And that's not what we are anticipating now."
Data shows that leisure travel is recovering first, Hite continued, although there is still uncertainty whether that will be sustained after Labor Day. "But we can't just survive on domestic leisure business forever," she added. "We've got to have business travel back and then group meetings — we've got to get group meetings back. But that won't be until next year. And certainly if the virus presents more risk of another wave of infections, that all pushes this demand recovery that we're expecting in 2023 even further out. On the upside, if there's a vaccine, it could happen sooner."
Upsides and even optimism were also expressed during today's sessions at the conference. "The encouraging news is that people are waiting on the sidelines to book," noted Sourav Ghosh, executive vice president of strategy and analytics for Host Hotels & Resorts. "Our tentative [group business] pace is up 30 percent — which shows that people definitely want to get out there and meet.
"We expect association business to come back first," Ghosh continued, "and then eventually followed by corporate group — I would say by the second half of next year, once there is a vaccine out there or a strong therapeutic."
Most encouraging, Ghosh added, are customers' future plans. "When you look at our 2022-to-2023 pace, that's essentially flat. When talking to meeting planners and our hotel managers, when folks are looking out, their expectations in terms of how they want to hold their meetings — what kind of banquet and catering they want and all the other bells and whistles — those expectations haven't changed. In my mind, it's really a matter of time."
Such cautious optimism was evident in many of the sessions, in part because the current numbers don't reflect any kind of typical, cyclical economic downturn. "This is a function of something completely external," explained economist Adam Sacks, president of Tourism Economics. "This just tells us what happens when you shut down an economy for the better part of two months."
Things will get better, Sacks insisted. "We hold very strongly to the premise that recovery is inevitable," he said. "The things that drove travel before this crisis are going to be very much in place on the other side of this crisis — the need to meet, the need to travel, the need to build new memories, to experience new things. Those things are still going to be there at the end of this crisis. And so now we hang on and wait for that day."