The U.S. lodging industry is on track for a full recovery in 2023 from the pandemic-induced chaos, according to a new forecast from CBRE (NYSE:CBRE).
What Happened: Despite a slowdown in new hotel construction and the current high-inflation economy, CBRE is pointing to a full recovery in average daily rate (ADR) this year and in demand and revenue per available room (RevPAR) next year.
CBRE noted that the threat of the omicron variant did not damper the lodging sector’s vibrancy, with first-quarter RevPAR at $72.20, up 61% year-over-year. RevPAR growth was fueled by a 39% spike in ADR and a 16% rise in occupancy. First-quarter ADR was also 5% above 2019’s level, making it the third consecutive quarter in which levels exceed the same period in the pre-pandemic era.
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What Else Happened: CBRE predicted better relative performance for hotels in drive-to leisure destinations, particularly within high-end properties that attract consumers who are less burdened by high inflation rates. However, the company noted that higher gas prices, food costs and mortgage rates could potentially dissuade budget-minded consumers who frequent interstate hotels from making travel plans — although that is not evident at the moment.
“To date, there has been no sign that the more than 50% increase in gas prices and the stock market’s hovering near bear-market territory are dampening hotel demand,” said Rachael Rothman, CBRE’s head of hotel research and data analytics.
“However, in the past, a steep decline in the S&P 500 and high gas prices have often caused RevPAR growth to decline, which raises the specter of a pullback in RevPAR later this year. Despite this possibility, our outlook remains that the market will continue to recover.”
