PwC Predicts Hotel RevPAR to Exceed Pre-Pandemic Levels This Year
Rising average daily hotel room rates are expected to drive 2022 RevPAR above 2019 levels, according to the May 2022 Hospitality Directions USA report from PwC’s hospitality and leisure sectors practice.
The PwC report predicted average daily room rates will increase 16.9 percent for the year, with RevPAR up 28.1 percent—approximately 106 percent of pre-pandemic levels.
“Despite volatility in the financial markets and heightened concerns over the humanitarian crisis in Ukraine, we now expect U.S. hotels to surpass 2019 RevPAR levels this year, driven by strong growth in room rates stemming from focused revenue management strategies of operators,” said Warren Marr, PwC’s US Hospitality & Leisure managing director.
Hotel occupancy rates for the year are expected to rise to 63.1 percent, according to PwC.
“As in our last outlook, the big story remains room rates,” the report noted. “Average daily room rates surpassed comparable 2019 levels in every month of Q3 and Q4 last year, and in February, March and April this year (January missed by $0.28). RevPAR in March and April exceeded comparable 2019 levels, and this is expected to continue through the forecast period.”
Rising demand from individual business travelers and groups in 2023 is expected to offset any softening in leisure travel, which boomed domestically during Covid-19 as vacationers chose to stay closer to home and international travel tanked.
The optimistic forecast comes despite the surge in Covid-19 infections related to the spread of the omicron variant in December 2021 and January 2022.
The report noted that while leisure travel will drive demand for lodging in the first quarter of 2022, and will continue to do so into the summer, “individual business travel and group business has started to emerge as we head into the warmer months.”
Growth in transient business and group travel by the fourth quarter of 2022 could be anticipated if Covid-19 immunity levels continue to grow in the U.S. and tensions ease in the ongoing conflict in Ukraine, the report said. However, the report noted that lodging’s recovery “could still be bumpy this year” if the Russian invasion of Ukraine continues to cause geopolitical and financial volatility.
Further emergence of new Covid-19 variants, along with the impact of rising interest rates, also could slow lodging industry recovery.
The May 2022 report cited data from IHS Markit showing that U.S. gross national product declined slightly in the first quarter of 2022, although it expected to finish the year with 2.4 percent growth. The research also found that the unemployment rate for the hotel sector increased from 4 percent in March to 5.2 percent in April, higher than the unchanged overall U.S. unemployment rate of 3.6 percent.
“IHS Markit expects the unemployment rate to average 3.6 percent this year and 4.0 percent next year, as certain sectors, like hotels and airlines, try hard to add back previously shed jobs,” according to PwC.
Bob Curley www.businesstravelnews.com