PwC has released its updated perspective on the U.S. lodging industry through 2022, incorporating how the rapid rollout of three vaccines—earlier than originally expected—has accelerated the company’s recovery timeline.
In PwC’s November forecast, the analytics firm assumed the significance and frequency of then-recent COVID-19 case spikes would increase the length and severity of the pandemic. But the U.S. passed a milestone in mid-December when the Food and Drug Administration announced emergency-use authorization for three COVID-19 vaccines. These, the report says, have “greatly helped mitigate the spread of the virus.”
Today, according to the latest U.S. Hospitality Directions report, PwC expects annual occupancy for U.S. hotels this year to increase to 57.2 percent and average daily room rate to increase 8 percent, with resultant revenue per available room up 40.1 percent from last year. RevPAR is expected to finish 2021 at approximately 74 percent of pre-pandemic levels.
Despite increasing vaccinations (35 percent of the U.S. population was fully vaccinated as of May 11) and consumer optimism, lodging’s recovery is expected to remain uneven. Leisure-focused destinations likely will see increasingly strong performance through the summer, but that may not last through the autumn. Destinations that traditionally rely on individual business, group and international demand may continue experiencing near-term weakness as companies evaluate travel policies and countries assess cross-border travel risk.
The update comes on the heels of STR and Tourism Economics' new guidance. That forecast predicts occupancy will reach 53.3 percent for this year, while ADR will reach $109.47 and RevPAR will be approximately $58.39. Compared to 2019, these metrics will be down 50.1 percent, 32 percent and 17.9 percent, respectively.
Based on preliminary results in the beginning of May, STR President Amanda Hite predicted 53 percent of U.S. hotels would be above 60 percent occupancy in April. “What's changed the most about the forecast is really [that] we're pulling the growth forward because the first quarter was so much stronger,” Hite said when presenting the updated guidance at the Hunter Hotel Investment Conference earlier this month. “We don't think that business travel or group business is going to change significantly from what we forecasted, so we're just pulling some of that [leisure growth] that we had expected in the second half of the year and into 2022 forward to this year.”
For 2022, PwC forecasts the vast majority of temporarily closed hotels will have reopened and demand growth will continue to improve as the economy strengthens. Occupancy and ADR will continue to grow, resulting in a year-over-year RevPAR rebound of 15.2 percent, or approximately 85 percent of pre-pandemic levels.
As hotel owners began to gain confidence that the rollout of vaccines has started to tamp down the virus, April unemployment for the hotel sector improved to 13.8 percent (from 19.9 percent in March) compared to the U.S. overall rate increasing slightly to 6.1 percent (from 6 percent the previous month).
The report acknowledges, however, that the forecast may change depending on overall market recovery and possible virus mutations.