September 28, 2021
Updated U.S. Lodging Forecasts Now Available

Recent trends show emergent signs of weakening; the pace of improvement has slowed in most markets, and we are seeing a reversal in trends overall in others.

 

We have competing dynamics at play. On the one hand, kids have returned to school and parents have returned to their offices (to varying degrees), hurting leisure travel, but potentially boosting business travel. On the other hand, the increase in COVID cases and hospitalizations are muting the benefits of increased vaccination rates and individuals' willingness to get on with life in a post-pandemic world.

 

With respect to hotel fundamentals overall, we expect trends to soften once again as we head into the fall and winter season, particularly in the northern or colder weather markets; however, individuals are adapting to the new normal and we don’t expect trends to test the lows seen early in the pandemic.

 

Our forecasts call for most major U.S. markets to recover by 2024 but the key “winners” and “losers” may look completely different than they did in 2019.

 

  • Winners/Losers: Sunbelt markets and drive-to-leisure destinations are expected to rebound quickly, while group-oriented hotels, northern markets, and global gateway cities reliant on inbound international travel (ex. LatAm) are projected to lag into 2025 and 2026.  
     
  • Group Trends: Convention travel will resume first in the low- cost-to-operate markets with inexpensive airlift and relatively fewer health restrictions. These are markets where attendees feel more comfortable socializing outside and given the wide-ranging availability of convention space, planners can easily choose warmer weather and low- cost-to-operate destinations, such as Dallas, New Orleans, San Antonio, Las Vegas, or Orlando, among others. 

  • Business Travel: Core urban hotels in high cost-to-operate markets will continue to experience softer trends given a delayed return to office and the ‘great migration south’ that took place over the pandemic. We expect business travelers to take fewer but longer trips to minimize the environmental impact (ESG push by large companies/investors) and COVID flight exposure, and to extend their trips in leisure markets to incorporate shoulder stays. 
     
  • Big picture: U.S. demand will recover by 2023, and ADR in 2024, but occupancies will remain below prior peaks due to wage pressures and labor shortages as operators will work to maximize rate over pushing occupancies. Over time, as outbound international travel resumes, we could see occupancies soften in high-end resort markets that have benefitted from the spike in luxury leisure demand created by the international travel restrictions, but we don’t expect the full benefit of the rate performance over the last year to be reversed.  

  • Costs (capital and operating) will remain a key area of focus: We expect hard-hit owners to push back aggressively as the brands move to enforce brand standards, FF&E reserves, and 7, 14, and renewal capex once again. Owners of branded properties will work to reduce costs by limiting benefits to customers who booked direct, but technology-enhanced revenue generation tactics will be necessary to normalize profits.  

To purchase and immediately download our updated forecasts visit: Property Information Portal

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Rachael Rothman, CFA is Head of Hotels Research & Data Analytics for CBRE.  She can be reached at [email protected].