Hotel Data Conference: STR, TE release upgraded U.S. forecast

NASHVILLE — As the Hotel Data Conference began, STR and Tourism Economics released their latest U.S. hotel forecast, with improved predictions for 2021 as a whole and lessened growth projections for 2022. Additionally, full recovery of demand remains on the same timeline for 2023, while revenue per available room is projected to surpass 2019 levels in 2024.

Overall, for 2021, the forecast calls for U.S. hotel industry occupancy of 54.7 percent, average daily rate of $115.50 and revenue per available room of $63.16. The occupancy and RevPAR figures use STR’s total-room-inventory methodology, which assumes no closures due to the pandemic. In 2019, the recovery benchmark, occupancy (66 percent), ADR ($130.91) and RevPAR ($86.35) were all at or near all-time highs.  

For 2021, Norfolk/Virginia Beach and Miami are the only Top 25 Markets predicted to beat their 2019 RevPAR levels—more so because of ADR rather than occupancy. According to the forecast, San Francisco, New York City and Boston are expected to be the furthest from their 2019 levels in the metric.

The upward revision for 2021 reflects the surge in demand that has already occurred as well as room rates hitting an all-time high on a nominal basis. While the summer leisure demand would normally be supplanted by business travel, the Delta variant and general concern may mean that corporate travel does not ramp up again until early 2022. The forecast has kept 2023 or 2024 as the “finish line” for the recovery. 

Prognosticating Post-Pandemic

At the conference, Amanda Hite, president of STR; R.Tyler Morse, chairman and CEO of MCR; and Monica Xuereb, chief revenue officer of Loews Hotels & Co., gathered during the opening general session to discuss the new predictions and the overall value of forecasts in tumultuous times. 

The outperformance in Q2 does not significantly boost the forecast for the next two quarters, Hite noted, so STR added 28.3 million room nights of demand to the new full-year forecast. “We already realized 11.8 million of those room nights in the second quarter,” she said. “It's not a significant change in the outlook for the third and fourth quarter.” 

Hite noted the disparity between the leisure forecast and the business forecast. STR expects the leisure segment to end 2021 about 17 percent higher than it was in 2019. And while STR expects some business transient recovery this year, the overall outlook hasn't changed significantly with this upgrade, and the segment will likely end up at 70 percent of the 2019 levels by the end of the year. “We know that business transient and group are the things that we need to really get some momentum going before we start to see full recovery for the industry, and that's not going to happen until 2022,” Hite said. 

Improving rate is “really the positive story” in the forecast, Hite continued. “From my standpoint, we never upgrade rate when we redo our forecast, so to go to a 12 percent growth rate for [ADR] with this upgrade forecast is just fun to see. It has been phenomenal.” 

The anticipated year-end ADR of just over $115 will put the industry back to 88 percent of its 2019 levels. “And then for 2022, we will have $122 ADR, which is going to put us back at 94 percent of our 2019 levels,” she said, noting that most chain scales (excluding upper upscale) will have rate growth of 5 percent or better.

Luxury Growth

That exclusion of segments at the top of the chain scale can be worrisome to luxury brands like Loews, which Xuereb said is doing well in terms of rate at 91 percent of 2019’s average, but is facing reduced occupancy in urban hotels. “The resorts are doing great, but the city hotels are definitely challenged.” 

Xuereb said she would “love to see” a 12 percent increase in ADR, but does not expect it to happen in the upper-upscale and luxury segments. “The reason for that is because we've been missing business travel and groups—two segments that have lower average rates but obviously have a huge positive impact [on] RevPAR and to overall revenue.” Still, she expects those segments to return next year, so while average rates may continue to stay below 2019’s numbers, RevPAR will “do great,” she said.

The company’s second quarter of the year “definitely overperformed” expectations, Xuereb noted. “Q2 has always been historically our strongest quarter, And I think, similar to most of you, we projected a recovery of every single quarter ... but the rebound in the middle of the first quarter just surprised all of us. I think luckily everyone seems to have reacted very well with pricing.”

Inflation and Travel

Morse, for his part, expects the economic impact of the pandemic to be on par with the oil embargo of 1974, with “substantial and massive inflation.” As such, he expects the industry to outperform the forecasts from a rate standpoint. “In 2019 there was $4. trillion in U.S. bank accounts for U.S. consumers,” he noted. “Today there is $6 trillion. It's gone up by fully 50 percent.” This, he suggested, is what is driving the strong leisure travel numbers. And while white collar workers may have stopped traveling for business, blue collar workers are still on the road and driving occupancy. 

Ultimately, Morse said, nothing has changed permanently and people will continue traveling whenever possible. “Travel is like breathing. People love it. People are going to continue to travel. It has tremendous tailwinds behind it as a sector,” he said. “This is a little blip along the way.” When COVID first hit in early 2020, he said, the doom-and-gloom forecasts turned out to not be as bad as expected. “People said the same thing after 9/11. ‘People are gonna stop traveling, they're not going to feel safe, they're never gonna travel.’” But within six months after the terrorist attacks, travel was above where it had been before.

With that in mind, Morse said that MCR has stopped trying to predict the economic future, and dismissed the concept of forecasts with an expletive. “Nobody knows what's going to happen,” he said. “Forecasting takes a tremendous amount of time and effort, and we're in the bed-making business, not in the forecasting business. So I would prefer that our team spends more time on selling than forecasting.”