The U.S. hotel recovery is clearly continuing as the latest data from April 2021 paints a stark contrast to hotel performance a year ago.
In April 2020, U.S. hotels set a record for a year-over-year decrease in revenue per available room. In the same month in 2021, hotel RevPAR rose by more than 200%, said Jan Freitag, CoStar Group's national director for hospitality analytics.
But given the wild swings in data, it's more insightful to benchmark U.S. hotel performance in 2021 against 2019 numbers, he said. Since the start of the year, monthly U.S. hotel RevPAR change has stayed negative compared to the same months in 2019, but the decreases are lessening.
Freitag said the positive trend should continue and possibly look even better throughout the summer.
"The trajectory continues to show that the recovery is ongoing," he said. "We fully expect that the data will continue to get better throughout the summer as leisure travelers hit the road. Then corporate transient and corporate group demand will pick up in the fall, and data should improve as the year progresses."
Absolute hotel occupancy in the U.S. reached 57.5% in April, but the metric won't improve as quickly as the demand figure because more hotels are reopening and adding rooms back to the total supply.
Insights on the New Forecast
STR — CoStar Group's hospitality analytics division — and Tourism Economics released the latest forecast for the U.S. hotel industry in mid-May at the Hunter Hotel Investment Conference.
What's important to note is that STR and Tourism Economics now project higher demand growth in 2021 than in 2022, which Freitag said is a reversal from the previous forecast.
"The first quarter of this year showed room demand that was much stronger than what we had expected," he said. "So, this change in our forecast is not an indicator of a change in conviction for the remainder of the year, but purely a function of the first quarter coming in well above expectations."
Changes in average daily rate are a bit tougher to predict, Freitag said.
"The ADR percent change continues to be the number that gives us pause, specifically when you compare the growth to the decline in 2020," he said. "The increase this year is relatively strong compared to the historic averages, but they are still nowhere near strong enough to make up for the sharp declines of over 20% throughout the pandemic."
So how does the latest forecast for each year compare to the 2019 benchmark?
"Occupancy is recovering a bit quicker than ADR and RevPAR," Freitag said. "The full recovery pace to 2019 has not changed. The forecast continues to call for a demand recovery to 2019 levels in 2023 and an ADR recovery to a 2019 levels in 2025."
Labor and Luxury
The outlook on the U.S. hotel industry is positive as more people are vaccinated against COVID-19 and grow more comfortable resuming travel. What might temper the industry's recovery is how quickly it can rehire workers to meet demand, Freitag said.
"But hiring is not happening fast enough, and some operators are telling us that they are leaving rooms unsold — not because there is no demand but because they just don't have the capacity to clean them," he said.
Some hotel segments could recover more quickly. One example is the luxury class, which hasn't had to slash rates to help the bottom line. Instead, some luxury hotels have temporarily closed and are now reopening for business.
Freitag said travelers who regularly book hotel stays at luxury properties have money to burn this summer, which is a good sign for the recovery of the luxury segment.
"Luxury room rates have recovered much, much faster than their total U.S. counterparts," he said. "What we have seen in the summer and the beginning of 2021 is that the leisure customers with trillions of dollars in additional savings are eager to hit the road again."
For Freitag's full insights, watch the video above.