RevPAR recovery in 2022 to be mixed in major markets

According to CBRE’s March 2022 Hotel Horizons forecasts, U.S. major market revenue per available room will increase a very strong 32.8 percent during 2022. Among CBRE’s 65 tracked markets, the 25 largest markets will see even greater growth (33.7 percent). Both of these projections are nearly double the national lodging market RevPAR forecast of 17.5 percent.

Hoteliers reviewing the forecast performance for CBRE’s 65 Hotel Horizons markets should not be misled by the relative changes in RevPAR projected for 2022. While San Bernadino, Calif.; Charleston, S.C.; Savannah, Ga.; and St. Petersburg, Fla., are forecast to experience the least gains in RevPAR during the year, by year-end they will have achieved RevPAR levels above their 2019 RevPARs. Conversely, San Francisco and New York City hotels should enjoy RevPAR gains of more than 70 percent during 2022, yet for the year, still fall short of their 2019 RevPAR levels by 20 percent.

By year-end 2022, 23 of the 65 markets in CBRE’s Hotel Horizons will reach annual RevPAR levels equal to or greater than the RevPAR levels they achieved in 2019. Conversely, six additional markets will join San Francisco and New York and still lag their 2019 RevPAR levels by more than 20 percent.

The differences between the two sets of markets are discernable. Those markets forecast to recover to 2019 RevPAR levels are relatively small, leisure oriented and located in either resort or remote areas. The eight markets farthest from recovery are all large gateway markets located along the Atlantic and Pacific coasts.

Supply and Demand

The overall U.S. lodging supply is forecast to increase 1.4 percent in 2022. This is less than the long-run average of 1.8 percent. High prices for construction materials—including lumber and steel—and labor make the development of most new projects cost prohibitive, limiting the delivery of new rooms over the medium to longer term.

Five markets will see their inventories contract during 2022. Poor performance levels in 2020 and 2021 have resulted in permanent hotel closures in Hartford, Conn.; Cleveland; Newark, N.J.; Virginia Beach, Va.; and Pittsburgh. On the other hand, developer interest has returned to New York; Austin, Texas; and Nashville. In 2022, the supply of hotel rooms in these markets is forecast to increase greater than 4 percent.

After suffering the most in 2020 and 2021, the major urban markets of New York, San Francisco, Boston and Hawaii will see the greatest demand growth in 2022. San Bernadino is the only U.S. market forecast to suffer a decline in demand during 2022 because it will not experience the same demand for logistics businesses as it did in 2020 and 2021. 

Occupancy and ADR

CBRE expects domestic and drive-to resorts to show strength once again in 2022 as the war in Ukraine and the resurgence of COVID-19 overseas could persuade wealthier U.S. travelers to prefer domestic destinations. Elevated gas prices could hurt more budget-minded consumers who frequent interstate hotels. Accordingly, hotels in leisure-oriented markets will enjoy the greatest occupancy levels in 2022. Cities in the Midwest dominate the list of markets forecast to achieve the lowest occupancy levels in 2022. These markets are still predominantly commercial-oriented.

According to Kalibri Labs, average daily rate reached 2019 nominal levels during the third quarter of 2021. CBRE expects that ADR will once again exceed 2019’s levels following a pause during the first quarter of 2022. A recovery in higher-rated, inbound international travel, the resumption of more traditional business travel, labor market tightness and higher overall inflation will drive higher rates.

ADR growth during 2022 is forecast to be the strongest in the markets projected to see the greatest gains in demand. ADR growth will exceed 25 percent in New Orleans, New York, Austin and San Francisco, and will be limited to less than 4 percent in Dayton, Ohio; Omaha, Neb.; Charleston; and the Florida cities of St. Petersburg and Jacksonville. 

Robert Mandelbaum is director of research information services for CBRE Hotels’ Americas Research