The US lodging industry continued to benefit from an outsized improvement in leisure demand through the summer months. As kids headed back to school, individual business travel and group demand that historically replaces summer leisure business post Labor Day has yet to surface, with office re openings pushed later into 2021 or early 2022 as a result of the delta variant of the virus.
That said, given the strength of demand during the summer, we expect annual occupancy for US hotels this year to remain consistent with our May 2021 outlook, increasing to 57.1 percent.
The bigger story is the significant lift in average daily room rates during the back half of Q2 and Q3; exceeding 2019 (pre-pandemic) levels in each month of Q3. We now expect average daily room rates to increase 19.6 percent for the year, with resultant RevPAR up 55.1 percent, approximately 82 percent of pre-pandemic levels.
"If vaccinations increase and infection rates continue to drop as we close out 2021 and start the new year, demand from individual business travelers and groups will improve, with average daily room rates in Q3 and Q4 2022 expected to surpass comparable 2019 levels."
Warren Marr, US Hospitality & Leisure Managing Director
Trends and highlights
- With slowing growth in vaccinations (59% of the US population was fully vaccinated as of November 16, 2021) and waning consumer optimism as we head into the final month of this year, lodging’s recovery is expected to remain uneven.
- In 2022, as previously forecasted, we continue to expect the vast majority of temporarily-closed hotels will have reopened and demand growth (particularly from individual business travelers and groups) will improve if infection rates continue to drop. Continued growth in both occupancy and ADR is expected, with a year-over-year rebound in RevPAR of 14.4%, approximately 93% of pre-pandemic levels. ADR in Q3 and Q4 2022 is expected to surpass comparable 2019 levels.
- Despite hotel owners continuing to staff up with increasing demand levels, October unemployment for the hotel sector increased to 12.9% (from 11.0% in September), compared to the US overall rate decreasing to 4.6% (from 4.8% the prior month).
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