STR, Tourism Economics Upgrade 2021 U.S. Hotel Forecast on Demand Surge
STR and Tourism Economics have upgraded their 2021 U.S. hotel forecast for the second time in three months, citing a surge in demand and “room rates hitting an all-time high on a nominal basis,” STR president Amanda Hite said in a statement.
The companies, however, tempered their growth projections for 2022. Despite the momentum in 2021, there is concern demand will recede after the summer.
“In normal years, summer leisure demand would be supplanted by business travel and large corporate events, but with more concern around the delta variant as well as delays in companies returning their employees to offices, it’s possible that businesses wait until early 2022 to put their people back on the road,” Hite said. “Even though we expect some of that demand to shift into 2022, we brought our projections down in comparison with a stronger-than-expected 2021.”
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In the new forecast, released Thursday at the Hotel Data Conference, STR and Tourism Economics project 2021 U.S. hotel occupancy of 54.7 percent, 1.4 percentage points higher than its prior forecast, issued in May. The companies project a 2021 average daily rate of $115.50, up from $109.47 in the May forecast, and revenue per available room of $63.16, up from $58.39.
Rate Integrity Surprise
Second-quarter rates surged with demand, Hite told BTN at the Americas Lodging Investment Summit in late July, adding that rate integrity among the biggest surprises for her in the recovery.
“That’s the first time rate outperformed that way in years,” Hite said. “There is truly so much demand, especially on the weekends, that hotels are close to selling out. They are more confident in their pricing because they are not trying to fill rooms. … There’s been no reason to cut rates.”
Still, the recovery remains uneven and is dependent on the market and type of hotel. “Large hotels with 300 rooms or more in the top 25 markets are still devastated,” she said, adding that STR has begun to see occupancy growth there, “but full recovery depends on groups and meetings and business travel.”
Group and Transient Trends
While the 3.1 million U.S. group room nights recorded in June represented 38 percent of 2019 demand, and were used mostly by social groups, STR’s ADR index for June group business was at 88 percent of 2019, Hite said. “That group ADR number is really surprising given how low demand is,” she said. “It speaks to the revenue management discipline. They’re making sure they are pricing for the business mix.”
Group demand was recovering well into July, but as the delta variant spreads, Hite said STR now expects slower pickup for groups on the books.
“Group will still happen, but I won’t be surprised to see some cancellations in markets with high case counts and low vaccination rates,” she said. “They are at risk for losing business. It’s hard to get attendees excited to go with higher-risk, less-vaccinated people. The good news is, we’ve been through it. People know to wear a mask, precautions flatten the curve. We’ve talked about it for a year, and we are not going back to a full lockdown or anything like that.”
As for opportunity for corporate travel managers, it could come after Labor Day. If people are not back in their offices and kids return to school, leisure will decline after the holiday, and hotels “are going to work hard to attract business during the week,” Hite said.
The downside is that for most hotels, it’s more expensive to operate than in 2019 because costs are increasing. “Staff, supplies, everything—costs have increased,” Hite said. “I don’t think a revenue manager will be willing to sign a contract on a block of business or group meeting at a highly discounted rate, because you can’t make money. There are a lot more costs.”
Donna M. Airoldi https://www.businesstravelnews.com/