Forecasts calling for mostly slow growth in 2020 for the hotel industry took a sharp downward turn in March as the impact of a global pandemic started to come into focus.

From that point, the data began changing rapidly, and forecasts had to adjust accordingly. For hotel industry forecast partners STR (parent company of Hotel News Now) and Tourism Economics, that required a monthly — rather than quarterly — forecast schedule during the hard-hit early months of the crisis.

[INFOGRAPHIC: How US hotel forecasts have evolved]

“We didn’t really wrestle with it from a forecasting perspective until March … and then in a rush, everything was changing so quickly, we realized we had to put something out,” said Aran Ryan, director of lodging analytics at Tourism Economics.

“We always put out the best forecast with the information available to us, but we did find it very necessary for the first few months to release a forecast every month, because data was changing not only by the month, but by the week,” said Emmy Hise, director of hospitality market analytics at CoStar Group, parent company of STR.

“Generally we didn’t see data swings like that. … People focus a lot on the monthly data, and for the first time, we analyzed every single week to see what was happening,” she said.

Hise said that analysis included balancing the news stories of the day — particularly regarding COVID-19 cases and spread — and that negativity with the optimism many still had in the industry.

Barbara Fraccascia, forecast and research analyst for Europe at STR, said the global hotel forecast was just as cloudy, despite China and parts of Europe having a head start on the U.S. in terms of the first wave of the virus.

“When we got to the May [forecast], it was kind of easier. We were still overly optimistic compared to what actually happened,” she said.

Fraccascia said forecasts were not accounting for a second wave of the virus or another round of lockdowns, but when that occurred, “you could really see the trend of what happened during the first wave and just kind of replicate that with some confidence.”

Projecting confidence and optimism in forecasts is important, particularly for economists, she said.

“Economists are always looking on the bright side, because if you forecast a recession, it’s going to happen, because it’s all about consumer confidence and investment and things like that,” she said.

However, as the crisis has worn on, forecasts have had to skew more realistic, Fraccascia added.

“There’s definitely been a change in the way we forecast. We’ve tried to be as realistic as possible and stop being overly optimistic,” she said.

Tourism Economics’ Ryan said determining what is realistic was the challenge, because no easy benchmarking existed for this crisis.

“With the initial forecast, the thought was that the downturn would be shorter and harsher or more severe, and at the time we had no ability to grasp how long it would be, with such a sustained overhang,” he said.

“The other big shift was the summer doing a lot, or somewhat, better than anticipated,” he added.

One aspect that was hard for forecasters to wrap their heads around was the complete absence of group business travel and events, Ryan said.

Forecasts also had to come to terms with the fact that the impact was going to be very different based on markets and regions.

“We’re trying to forecast which markets are going to be hit hardest and when do we think they are going to recover, but then we add in the layer: What are their restrictions, too? Because that factors on recovery. That’s a new thing we never had to factor before in top markets — restrictions [on travel and groups], which quite frankly is down [at] the county level,” Hise said.

Confidence in vaccine development also played a big part in forecasting optimism.

The number of temporary hotel closings due to the pandemic forced industry analysts to look at hotel supply and how it relates to performance differently. As a result, STR introduced a new metric — total room inventory, which factors hotel supply regardless of operational status (including those properties temporarily closed).

“The supply metric was a huge factor, because there’s two different ways to look at it. Some people want to see how the market is performing, assuming everything is open, because they want to see true occupancy, whereas others say, ‘No, I just want to look at what properties are open, because I want to know if my property maybe stays open or in this market,’” Hise said.

“We also had to be wary, especially the international team, of sufficiency issues and reporting data at all because there were so many temporary closures. That makes it tough to forecast if you can’t even use the historical data that you have. … With supply, we also had to take into account permanent closures, and this is something at a level we’ve never seen before. We’re making assumptions and we’re assuming a higher permanent closure rate, but we’ve never had temporarily closed hotels to this magnitude ever.”

That’s just one example of how the pandemic is likely to have a lasting effect on how the hotel industry is analyzed and forecast, Hise said.

“As a silver lining, I would say the best part is it made us take a deeper dive [into the data], which was fine, but also we got to work with the international team a lot more,” she said. “And that will continue without a pandemic because that collaboration has been very beneficial.”

From a broader economic perspective, Ryan said the crisis has “underscored the importance of segmentation,” for example the value of a deep dive into demand by day of the week.

“Looking at Tuesdays compared to Saturdays has been a good way to simplify it and show this is how much more Saturdays have recovered, even though they’re still down,” he said.

“The intensity of focus through this process” of forecasting in a pandemic has “changed the foundation of forecasting,” Ryan said. “There’s been a lot of effort that’s gone on during this period to improving processes, improving communication, improving relationships. We’ve certainly iterated faster work, more collaboratively.”

Globally, going into 2020, there was optimism particularly around major events, but challenges were expected — just not to the extent that was realized, Fraccascia said.

“Major pressure was coming from supply, because there was a lot of supply coming into our markets, and also one of the biggest challenges that we were forecasting was Brexit for Europe. … In top source markets, for example Ireland or Spain, [there were] political challenges,” she said.

“But definitely we were forecasting a strong growth in demand, with the major pressures on rate. That means strong confidence in the markets … and a lot of demand coming in, especially with some very big events that we were expecting,” she added, citing Euro 2020 across Europe, Expo 2020 in Dubai and the Olympics in Tokyo — all of which were canceled or delayed by the pandemic.

A drought of business travel and corporate events is likely to continue at least through the first half of 2021, she said, but “we’ve started to see some events coming back at least now in the calendar from Q2 to Q3 of next year.”

“As for attendance, we expect that to be a lot lower than previous expectations. However, there’s always the positive of knowing that as soon as the borders open, people want to travel. I do believe in a kind of revenge travel,” she said.

Fraccascia said over-tourism — a major pre-pandemic concern for some international markets — is not likely to be a pressing issue for some time. Compression nights, when occupancy is at 95% or higher, are also currently out of the question.

“There is no more compression, and compression nights are a really big factor in our [forecasting model]. All of the cities that we forecast — London, Dublin, Barcelona — these are markets that are extremely compressed" typically, she said.

“Places like Prague, Amsterdam, they suffered from over-tourism, which is another big hit. They’re not going to have any over-tourism in the next year, so that’s going to change their markets.”

Those markets will benefit in some ways from a healthier level of tourism, “but also all of the opportunities [for hotels] to grow rates are going to disappear,” she added.

Robert McCune is senior managing editor for Hotel News Now, a CoStar Group news service covering the hotel industry.