DALLAS — Tourism Economics President Adam Sacks said it's an "audacious task" to predict what's ahead for hotels and tourism as the COVID-19 pandemic continues to take unforeseen twists and turns, but ultimately he believes travelers will be undeterred.
Speaking during the 2021 HSMAI Revenue Optimization Conference, Sacks noted recent surveys show travelers have heightened concerns as cases and hospitalizations spike due to the delta variant, but those concerns have not translated into behavior. He also said hoteliers have done a good job making the most of the strong summer leisure demand.
"That concern and the effect of the delta variant, at least in terms of the high frequency data, is not leaving a mark, at least not yet," he said. "In terms of rates, I think the most extraordinary thing about this from a revenue optimization standpoint is how well the industry held rate even in the midst of incredible demand volatility."
All of this adds up to what Sacks described as a "downturn and recovery that is truly unlike any other we've seen in history."
"If you go back to previous recessions, you see rates falling out and taking much, much longer to recover," he said. "The rule of thumb has always been — always been until now — that rates take several years longer after occupancy recovers. Not so with this downturn."
Sacks said the industry broadly recognized the unique factors that led to this recession, and that cutting rates would do nothing to induce new demand.
"The things that are affecting demand are not price-sensitive," he said. "They are risk-sensitive, and prices do not necessarily affect that."
Those risks are tied back to COVID cases and hospitalizations, which Sacks said he now tracks as a leading indicator.
He said it's important to note that the recovery has been much more uneven than others in the industry's history, based on data from STR, CoStar's hospitality analytics firm.
"You see urban markets have of course fared much worse, and there's still a long way to go with [revenue per available room] down 32% in the month of August [compared to 2019]," he said. "Compare that to the U.S. average, which is down just 8%. That's a big difference. Or if you're in a resort area where you're actually up 5% in August relative to 2019. Wherever you are in the country of course makes a huge difference right now."
Overall, Sacks said he believes the economy will be strong enough to provide a strong and sustained recovery for hotels and travel.
"The economy will indeed provide a foundation, will indeed provide that fuel for the continued recovery," he said. "The recovery has legs, as far as the economy is concerned."
He said strong jobs growth over the course of the pandemic has given him hope.
"The August jobs report was underwhelming. Lets call it that. It was only 235,000 jobs," he said. "But we lost 22 million jobs in the spring of last year, and we've recovered all but 5 million of them. The unemployment rate now stands at 5.2%. If you factor in the people who have left the labor force, it's still around 7.5%, which is still an incredible recovery in the job market which has had a huge income effect."
Sacks said data from Tourism Economics' parent company Oxford Economics indicates that inflation will normalize to more sustainable levels.
"The expectation by Oxford is that inflation is on its way down; it is abating," he said. "We've already seen that in the last couple of months of data."
He said the factors the have raised costs — other than labor dynamics, particularly in travel — should "begin to level off."
Sacks' company now projects the U.S. economy to grow gross domestic product by 5.5% in 2021.
"That's historically strong," he said. "You go back to the mid-1980s to get growth that strong. [That will be] followed by 4.4% GDP growth next year — also well above trend."
The caution flag Sacks throws up with that good news is that Oxford has scaled back its economic expectations in its last three forecast revisions, which he attributed to "the effects of the delta variant on corporate behavior and on consumer behavior."
Still, consumer spending has remained historically strong.
"Consumer spending is going to be the fastest growing in the year 2021 that it has been since World War II," he said. "You have to go back 70-plus years to get consumer spending up 8%. This is historic levels of consumption that we are expecting and that we're already seeing."