LOS ANGELES — Talks of a potential recession permeated the Americas Lodging Investment Summit, but industry analysts don't expect it would set hotel performance back much.

During "The Numbers — What To Expect in 2023 and Beyond" session, analysts laid out their revised forecasts for the year, where and how they expect demand to manifest and more.

STR’s latest forecast for the U.S. hotel industry upgraded its expectations for revenue per available room for 2023 to a 3.7% growth rate, STR President Amanda Hite said. That’s a 30-basis-point increase on RevPAR for the year, driven mostly by average-daily-rate growth. The forecast also increased ADR expectations by 50 basis points while occupancy was revised down slightly. STR is CoStar’s hospitality analytics firm.

The pace of RevPAR growth is expected to slow this year, but STR forecasts 6.6% growth in 2024, she said.

“We’re going to gain steam and momentum again and get back to those 2019 levels on a real (inflation-adjusted) basis,” she said.

The first quarter of 2023 will be the strongest of the year because of easy comparisons to the first quarter of 2022, Hite said. Hotel demand will start to slow in the second quarter as Tourism Economics, which works with STR on its forecasts, is calling for a decline in gross domestic product in the second and third quarters of this year.

“What we know about our industry, as we look at prior downturns, is that for every point of GDP decline, we usually have 4 points of demand decline for hotels,” she said. “We don’t think we’re going to have that this year, but we will see a GDP slowdown, which means we are going to see demand slow down after the start of the second quarter of this year.”

The forecast anticipates hotel demand to slow to a 2% growth rate from the second to the fourth quarter, she said.

STR has underestimated rate growth, and ADR has been outperforming its forecast, Hite said. However, ADR’s growth will likely slow in the second half of the year to be flat to slightly positive compared to the same period in 2022.

The bulk of RevPAR growth this year is expected to come from the luxury and upper-upscale segments. Occupancy is forecast to grow 4% in those two segments while it will fall in the upper-midscale and economy segments this year. Luxury ADR is expected to remain flat this year while the upper-upscale segment will have the largest ADR increase.

The forecast for general operating profit per available room shows a slower growth rate this year at 2.5%, but it is expected to grow by 6.6% next year.

“The increased expenses are going to continue to put pressure on profits for the next couple of years,” Hite said.

Global distribution systems and voice channels are still not expected to hit 2019 levels in sales while brand.com, online travel agencies and property direct channels already have and are expected to continue growing, Kalibri Labs CEO and co-founder Cindy Estis Green said.

“Some of the notable reasons for that is the GDS and the voice represent the group and the corporate business, particularly the managed corporate business that still hasn’t come back,” she said.

These sources of demand typically fall during downturns, but at the current levels likely won’t drop by as much as they have in previous downturns, she said. Most of the corporate business that has returned is generally the unmanaged or smaller and medium-sized accounts.

Brand.com bookings continue to outperform online travel agencies and are projected to improve dramatically compared to 2019, Estis Green said. This is the result of unusual changes in the nature and profile of the demand.

“A lot of what’s coming through the direct channels is related to the business travel,” she said. “That’s now coming through direct channels, not coming through GDS, so that Monday to Wednesday business we’re starting to see is coming through brand.com, and the rates are decent.”

The net average rate, taking all costs out, is about 12% higher than the net average rate of GDS when in previous years they were always about the same, she said.

The commercial business that’s returning isn’t driven by the Fortune 500 accounts but the smaller and medium-sized business, she said.

Michael Grove, chief operating officer at HotStats, said that while hotels have been able to significantly raise rates during the recovery from the pandemic, costs have also increased across the board.

Full-service hotels have absorbed costs much differently than extended-stay hotels, he said. This is due in large part to full-service hotels having more options for offsetting cost increases — instead of just raising room rates, for example, costs can be passed on to the guests through food and beverage, spas or golf amenities.

The latest numbers show that cost increases have started to slip, Grove said. “I think there are certainly some good signs in the fact that the costs are slowing down,” he said.

Hoteliers do need to find creative ways to drive rates or other spending per customer to offset the costs that have increased, he said. The beauty of the industry is that it is able to reset its rate each day, but it can’t reset wages or utility costs as frequently.

Ryan Meliker, president and co-founder of Lodging Analytics Research & Consulting, which tracks the 30 largest convention centers around the U.S., said that business is pacing up 13% year over year amid growing group demand for citywide events.

A recession will affect corporate travel, but it’s already at such a low basis relative to pre-pandemic levels that the impact will not be huge, he said.

Leisure travel is well above historical levels, but it will moderate in 2023, creating headwinds in markets that have greater exposure to leisure demand, Meliker said. Those with some corporate and group business will be able to offset that somewhat.

He expects the strongest U.S. hotel markets will be those that underperformed during the pandemic, such as San Francisco, San Jose, Minneapolis and Washington, D.C. Meanwhile, he expects performance to slide in markets such as San Antonio and Miami Beach.

“It's exactly reversed,” he said.

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