Performance in hotels is on the upswing, but economic and industry experts say the data indicates there is still a significant gap between current and pre-pandemic metrics more than a year after the onset of the COVID-19 pandemic.

The U.S. has seen a massive recovery from the 22 million jobs lost in the spring of 2020, Adam Sacks, president at Tourism Economics, an Oxford Economics company, said while speaking during the Hunter Hotel Investment Conference in Atlanta. However, the most recent jobs report was underwhelming and there are still 8 million jobs that haven’t been restored.

The unemployment rate stands at 6.1%, lower than the average during the last seven recessions dating back to 1960 when it averaged about 8%. The real unemployment rate, which factors in those who have left the labor force, is closer to 10%.

Going back to 1990, the hotel sector has been a faster job creator than the rest of the economy, he said. This sector has grown faster than employment in the rest of the economy at 38% compared to 29% over the last 30 years through 2019. In the last year, employment in the lodging sector has fallen back to 1988 levels. As of the April data, 27% of all lodging jobs are still lost. The unemployment rate with the lodging sector is 13.8% compared to the overall 6.1% rate.

“This is one of the two leading concerns of our industry right now,” he said. “It's ‘Will demand come back?’ and, ‘Will employees come back?’ But the reality is that there is still a significant way to go before we get back to where we were still with 1 in 4 lodging jobs lost.”

Travel confidence is a solid indicator of where the hotel industry is currently, Sacks said. Confidence has been growing consistently over the last few months. A survey of U.S. travelers from November found only 39% felt comfortable traveling outside of their community. A survey from the end of April shows that has increased to 60%.

The U.S. Centers for Disease Control and Prevention is reporting that 84% of those aged 65 and older have received at least one dose of a COVID-19 vaccine, and 58% of the entire adult population has received one shot. As the vaccination rate has increased in the U.S., the rate of deaths related to the virus has dropped dramatically, down 81% from as recently as January, Sacks said.

The outlook for the demand side is improving rapidly, and one of the reasons is fiscal stimulus, Sacks said. There may be parts of the stimulus that are causing unintended consequences, but the money invested since the start of the pandemic has equated to 25% of the country’s gross domestic product.

The massive-scale stimulus is driving economic growth across the country and will increase prices, he said. Oxford Economics expects inflation to top 3% before the end of the year, but it will be transitory as the stimulus runs its course and economic growth tapers off, allowing prices to subside. Still, the country will experience historic levels of GDP growth this year, over 7%, after the economy contracted 3.5% in 2020.

Over the last year, consumers have been spending their money on durable goods and non-durable goods while holding back on things like travel, he said. They’ve been splitting their direct stimulus payments into three categories: spending, savings and paying down debt.

“The smallest portion has been spending,” he said. “What this means is that consumers are, from a balance-sheet perspective, incredibly well-positioned to fuel a surge in travel because they paid down some debt and they've saved. They’ve saved $1.7 trillion over the last year — a massive, massive war chest as things begin to open up.”

STR has been focused on demand, looking at where it is and how it’s coming back, STR President Amanda Hite said. Instead of year-over-year comparisons, STR has been indexing 2021 performance to 2019 levels. STR is CoStar’s hospitality analytics firm.

“The demand numbers are improving, and we definitely have surpassed the high-impact low point of COVID, but we’re still pretty far off our pre-pandemic levels for demand,” she said.

March saw an uptick in demand, more so than expected thanks to travel for spring break, she said. Preliminary results for April show demand levels softened, but U.S. hotels are seeing higher demand now than they did last summer when leisure demand picked up.

At the beginning of 2021, a third of U.S. hotels reported occupancy below 30%, but that has improved each month, Hite said. Preliminary April results show 53% of reporting hotels were above 60% occupancy, but that also means almost half of hotels aren’t at the 60% level.

“This recovery is very different depending on who you are, where you're located, what type of hotel you have,” she said.

Hotels are mostly full over weekends, with Friday and Saturday nights near occupancy levels from 2019 while large gaps remain for weekdays, she said, noting hotels are doing “pretty well” on rate.

While hotels in the economy and midscale segments are seeing occupancies comparable to 2019 levels, those in the luxury and upper-upscale segments aren’t there yet, she said. They are, however, achieving weekend rates that are higher than they were in 2019.

“Luxury hotels are doing well with the pricing strategy for the business that's coming in on those weekends,” she said.

STR updated its U.S. forecast as demand came in stronger than anticipated during the first quarter. While STR’s rate expectation was “spot on,” leisure demand came in stronger than anticipated by the end of the quarter at less than 12% lower than 2019 levels instead of a 30% decline, Hite said. This year’s forecast came out in January when the vaccines were approved, but people were not receiving them yet.

The way STR expects business travel and group business to recover in the second half of 2021 has not changed, she said. It will start to pick up in the second half of this year, but it will be 2024 before group business and transient business travel return to 2019 levels.

The forecast states the U.S. hotel industry will end the year with revenue per available room of $58 and an occupancy rate of just over 53%, she said. Occupancy will hit the 60% occupancy mark in 2022.

Lodging delinquencies peaked at about 24% early in the pandemic, but they have been trending down, said Rachael Rothman, head of hotels research and data analysis at CBRE. The most recent data suggests 16% of commercial mortgage-backed securities are delinquent by more than 30 days, and it’s likely a large portion of those are assets that are currently closed.

“We would expect that number to trend down even further,” she said. “As hotels reopen and we move into the summer season, they should improve even more.”

There are now almost 150 lenders active in the hotel market compared to earlier in the pandemic when nearly all of them had exited, Rothman said. The number now is still below the pre-pandemic level of 200 to 250, but that’s still a significant improvement, she added. There are fewer lenders available for construction financing currently, which bodes well for the future of some same-store RevPAR growth.

There is still meaningful supply growth set to come online this year, but that will fade as there are fewer lenders for new projects and construction costs continue to grow, she said. Steel, iron and lumber now cost more than 30% above historical averages. There are the same number of workers employed in construction as before the pandemic, making it a tight labor market. The cost of construction labor has increased 6.1% since the beginning of the pandemic.

Hotel closures amount to about 4.5% of overall supply, with upper-upscale and luxury properties specifically having about 15% still closed.