The latest revised forecast from STR and Tourism Economics predicts that even with improving performance already underway, U.S. hotel demand will not return completely to pre-pandemic levels until 2023.
“Compared with our last forecast, we actually improved our demand projection for 2020 from -45 percent to -36.2 percent, but we expect it to take 11 quarters for the number of roomnights sold to rise to the corresponding levels of 2019,” said Jan Freitag, STR’s senior VP of lodging insights. “Similarly, it will take until 2023 for occupancy to reach the 20-year historical average. With lower occupancy levels, and the influence of discounting as hoteliers compete for market share, [average daily rate] could show a slower recovery timeline even with more normalization each quarter—we improved our 2021 ADR projection from +1.7 percent to +5.2 percent. Despite this better growth rate next year, we do not see ADR recovering to pre-2020 levels in the next five years.
“The good news is that demand and occupancy continue to rise slowly each week, and while slow, recovery should continue provided the country avoids significant setbacks in its progress against the coronavirus.”
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“The worst is behind us,” said Adam Sacks, president of Tourism Economics. “Recent performance has shown travel activity is picking up tentatively. Though COVID-19 will remain a defining factor through the first quarter of 2021, the outlook anticipates further gains in travel as confidence is gradually restored and restrictions are eased.”
In addition, STR also released its monthly profit-and-loss data, which show U.S. hotel gross operating profit per available room down 110.1 percent in May. That percentage change was a slight improvement from April’s decline of 116.9 percent. Additionally, limited-service properties showed positive profitability on average when surpassing 45 percent occupancy.
In a year-over-year comparison with May 2019, the industry reported the following:
- Gross operating profit per available room: -110.1 percent to US$-10.26
- Total revenue per available room: -88.3 percent to US$28.62
- Earnings before interest, income tax, depreciation, and amortization per available room: -130.9 percent to US$-24.14
- Total labor costs per available room: -69.5 percent to US$24.30
“Make no mistake, profits are still down significantly, and in many cases, open hotels are struggling to turn a profit,” said Joseph Rael, STR’s senior director of financial performance. “However, consistent with the occupancy and RevPAR trends shown in our weekly data releases, hotels opened up more in May and saw improved business compared with the previous month. As we have noted, the lower end of the market has seen less severe performance declines throughout the time of the pandemic, and in May specifically, we saw limited-service properties begin to turn a profit when crossing the 45 percent mark in occupancy.”