U.S. hotel performance data is about to look a lot better, by comparison at least, according to Jan Freitag, national director for hospitality analytics at CoStar Group.
Since COVID-19 was declared a pandemic in March 2020, the best the U.S. hotel industry has been able to hope for in terms of year-over-year percent change in revenue per available room — one of the industry’s key performance metrics — is down by about half.
Data for January shows that trend continuing into 2021, reflecting a 48.5% decline in RevPAR.
“This performance is basically par for the course for what we had expected,” Freitag said in a video analysis of the monthly data.
“RevPAR being cut in half has been the story of 2020 and will continue to be the story until March of this year when the comps get easier. And, of course, in April and thereafter RevPAR change is expected to be very, very strong.”
Actual performance, however, will take more time to rebound to pre-COVID-19 levels, as the factors weighing it down persist.
The latest forecast by STR, CoStar’s hospitality analytics firm, projects “room demand will increase by 18% [in 2021], which will drive up occupancy significantly,” Freitag said. “However, let’s be clear, we do not foresee any real pricing power to return to the industry for a few years.”
One factor continuing to affect U.S. hotel occupancy is the percentage of hotel rooms temporarily closed due to the low demand environment.
Actual occupancy was 39.3% for January — when, due to temporary closures, there were 3.3% fewer rooms available to be booked than there were a year before.
“That number of temporarily closed properties is much higher for full-service hotels, Freitag said, noting that in January, 9.2% of upper-upscale properties were out of service.
Higher occupancy reflecting growing demand is key to pricing power and room rate growth.
“It is our assumption that this year over half of rooms will still be empty, so that occupancy stands around 48%,” Freitag said.
By 2022, the forecast calls for occupancy to reach 60%, and even then pricing power is expected to be limited.
“While the difference between that 60% and the all-time high of 66% in 2019 might not seem like much, it is exactly those six points of occupancy that really drive compression night [average daily rate] growth and really give hoteliers pricing power,” Freitag said. “And we just don’t see that happening anytime soon.”
For more of Freitag’s insights into the monthly data and forecasts for 2021 and 2022, watch the video above.