As pandemic-related cases and restrictions have dropped in 2022, the traveler recovery rate has remained near or above 85%. Both leisure and business travel have contributed to a healthy and sustained rebound in traveler numbers. However, it may be some time before business travel reaches its 2019 levels.
Hotel performance has varied tremendously by asset tier and has been subject to variant concerns. Since mid-2020, luxury properties have remained above their counterparts in terms of revenue per available room, also known as RevPAR. More interestingly, while the lower tier’s RevPAR fell sharply in the second half of 2021, upper-tier assets maintained their gains in 2021, with minimal impact on RevPAR.
Occupancy tells a different story, though. While upper-tier properties typically have the highest occupancy rates, they are also the most severely affected by downturns in demand. This is likely because they don’t have the margins to lower average daily rates to bolster occupancy.
Moody’s Analytics CRE predicts that across all tiers, occupancy is expected to grow steadily through 2022 and into 2023 before leveling off and remaining stable after the recovery growth period. But be sure to watch jobs data. Labor is a crucial component of the conversation around performance in the hotel sector.
Adapted from “Room for Growth,” by Ermengarde Jabir, Ph.D., published in the CCIM Institute’s CIRE magazine, Spring 2022. Jabir is an economist with Moody’s Analytics REIS.
