Leisure travel demand has lifted the spirits of U.S. hoteliers this summer, but the positive trends are unlikely to continue the rest of this year.
In July, U.S. hotel average daily rate was 6% higher than July 2019. Although hotel occupancy declined 5.5% from the same month two years ago, revenue per available room — a key hotel performance metric — rose 0.2% to $99.71.
But Jan Freitag, national director for hospitality analytics at CoStar Group, said RevPAR change is unlikely to continue to be positive throughout the remainder of 2021.
"Continued strong leisure demand moved the monthly RevPAR to $99.71, which is actually $0.30 higher than it was in July of two years ago," Freitag said. "While it is certainly a good result, we want to caution it is likely not sustainable and full-year RevPAR results will continue to be negative compared to 2019."
In general, U.S. hotel average daily rate and demand have increased more quickly than expected.
"STR [CoStar Group's hospitality analytics firm] had initially suggested that [second quarter] ADR would grow year over year by around 33%, but it actually grew by 43%," Freitag said. "Demand was also a little bit stronger than expected. Clearly, healthy leisure demand from vaccinated travelers continues to drive up room demand especially in vacation destinations."
On Aug. 12, STR and Tourism Economics released an updated U.S. hotel industry forecast at the Hotel Data Conference. The biggest change in the new guidance is analysts expect lower growth projections in 2022, but a full demand recovery is still on track for 2023.
Freitag said another important highlight is 1.3% supply growth expected for 2021, which is "still well below the long run average of around 2% or so." He added that hotel projects in the pipeline have noticeably slowed.
When STR introduced its forecast update, panelists during the "Prognosticating Post-Pandemic: The U.S. Hotel Forecast" panel differed on how quickly U.S. hotels could recover, especially how rising inflation could affect ADR growth.
"At the Hotel Data Conference, [Chairman and CEO] Tyler Morse from MCR suggested that the rate growth that is projected here could actually be surpassed, because the level of inflation is so high, that in his opinion it should give hoteliers more pricing power," Freitag said. "Let's see if that comes true, because at the same conference, Aran Ryan from Tourism Economics suggested that inflation has indeed spiked, and that the increases in inflation will be much more muted going forward."
For more data insights, including a further breakdown of the latest U.S. hotel forecast, watch the video above.