US Hotel Industry Forecast Adjusts in Response to COVID-19 Winter Surge and Anticipation of Vaccines

In Response to COVID-19 Winter Surge and Anticipation of Vaccines, US Hotel Industry Forecast Adjusted

The current surge in COVID-19 infections has dampened expectations for U.S. hotel performance by the first half of 2021, however news of effective vaccines has bolstered projections of U.S. lodging industry recovery starting in earnest throughout the second half of next yr, in accordance with CBRE’s latest hotel forecast.

Based on the recently released Q3 2020 version of Resort Horizons®, CBRE Hotels Analysis is forecasting a mean nationwide occupancy level of 44.4 % throughout the first half of 2021. This measure will increase to 55.7 % throughout the yr’s second half.

“The elevated unfold of the COVID-19 virus and reinstatement of government restrictions, mixed with the lack of a fiscal stimulus package deal, has lowered our outlook for the efficiency of U.S. hotels throughout the rest of 2020 and through next yr first half,” stated Bram Gallagher Ph.D., Senior Hotel Economist with CBRE Hotels Research.

CBRE’s Q3 2020 forecasts call for a return to 2019 occupancy, average daily room rates (ADR), and RevPAR ranges in 2024. Basically, properties that function within the lower-priced chain-scale segments will recover to 2019 performance levels ahead of the higher-priced hotels. One exception is luxurious hotels. Whereas occupancy ranges on this class have declined considerably throughout 2020, luxurious still has maintained some relative stability in room charges. It seems that leisure travelers preferring luxurious lodging proceed to have the means to pay the price premium.

The various impression of COVID-19 on totally different teams of travelers turns into evident when analyzing changes in lodging demand by chain scale:

  • Luxurious and upper-upscale properties are most dependent on businesspeople and conventioneers and will see their demand levels decline by an extra of 60 % in 2020.
  • Conversely, resorts working within the economy and midscale segments will see their business fall off by less than 25 %.

“The confidence supplied by an effective vaccine will serve to sustain the relatively robust leisure travel patterns observed throughout the summer season of 2020, plus provoke a big return of corporate travelers throughout the second half of 2021. Group demand, then again, will lag in restoration due to the advance-booking nature of this segment,” Gallagher stated.

The prospects for enhancement in ADR throughout 2021 are influenced by these demand patterns. General, CBRE is forecasting a 1.3 % decline in ADR for U.S. resorts throughout 2021 and an annual will increase in ADR for every of the three lower-priced chain scales, however, continued declines in ADR for the higher-priced segments.

Development Exercise

Further bolstering pricing energy for U.S. hoteliers is a deceleration in the new hotel construction activity. CBRE forecasts U.S. hotel provides to extend by 1.8 % in 2020, and one other by 1.4 % in 2021. Nonetheless, the web provides gains are projected to dip under 1 p.c in 2022, thus decreasing the impact of recent competitors concurrent with the recovery in lodging demand.

Whereas income restoration might happen in 2024, some hotels may see their income return to 2019 levels earlier, as US hotel operators have enacted effective value control measures in 2020 to offset the severe declines in revenue, and will likely maintain them in place for the foreseeable future.