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Lodging data provider STR and analyst Tourism Economics have upgraded their joint hotel forecast to reflect a full recovery of revenue per available room this year. RevPAR is now expected to surpass 2019 levels before the end of 2022, according to the updated forecast presented today at the 44th Annual NYU International Hospitality Industry Investment Conference.
The major factor driving the accelerated recovery was the increase of $11 to the 2022 average daily rate. While occupancy is expected to be comparable to 2019, ADR and RevPAR are now projected to exceed 2019 numbers by $14 and $6, respectively. Previous forecasts called for the RevPAR recovery to occur in 2023.
When adjusting these projections for inflation, however, the timeline is slowed, with recovery expected in 2024. What's more, the more heavily impacted central business districts and the Top 25 Markets aren't expected to achieve full RevPAR recovery until after 2024.
"Demand and occupancy have trended well in line with our recent forecasts," said STR president Amanda Hite, "but pricing continues to exceed expectations due to the influence of inflation, as well as the economic fundamentals supporting increased guest spending."
According to Hite, the updated forecast takes into account the risk of a slight recession, with no expectations for mass layoffs or severe impacts to the average household. "The traveling public is less affected by recession," Hite noted "and right now, we are forecasting demand to reach historic levels in 2023 as business travel recovery has ramped up and joined the incredible demand from the leisure sector."
While the update is based on surging demand and room rates, Hite cautioned that the outlook for hoteliers is still tempered by a number of factors. Profitability has only recently started to match 2019 levels. "Concerns persist around the cost of labor and services," she added, "and hotels in some major markets are still well behind in the recovery timeline."
Recent changes to interest rates will be reflected in the next quarter's forecast revision, Hite said.
"With the Federal Reserve rapidly tightening monetary policy to tame inflation, there is a risk that financial conditions, which remain very accommodative, start to tighten in a disorderly manner," added Tourism Economics president Adam Sacks. While that could produce the risk of eroded business confidence, he explained, any potential resulting recession is likely to be less severe than the financial crisis of 2007-2009.
"Elevated savings buffers among consumers, particularly those of higher-income households, would help mitigate the impact of a downturn to sectors such as lodging," noted Sacks.