Travel Metrics Tick Up, Suggesting Upswing For Hospitality Sector

The hospitality sector is on an upswing after being roiled by the COVID-19 pandemic well into 2021, a new analysis finds. 

And upper tier properties are poised for the most growth:  Moody’s Analytics CRE predicts that RevPAR for the upper tier will grow more quickly than in lower tier properties this year and next. 

“For the upper tier, RevPAR recovered to just shy of $100, a threshold it is expected to cross in the second quarter of 2022 as the busy summer travel season gets underway,” Moody’s economist Ermengarde Jabir writes in a new analysis in CIRE Magazine. “Similarly, across all tiers, occupancy is expected to grow steadily in 2022 and into 2023, before leveling off and remaining stable after the recovery growth period.”

After climbing steadily throughout last year, the traveler recovery ratio fell to between 70 and 80% during the first two months of this year. That’s significantly down from a high of 90.1% over the busy Thanksgiving travel weekend. But as COVID-19 case rates have dropped, the recovery rate has hovered around 85% and exceeded 90% on several days.

“These figures are incredibly encouraging for the hotel sector because the late spring and summer months are busy for leisure travel, especially with expectations to see pent-up demand this year,” Jabir writes.

Jabir also noted that the higher travel recovery rates as of late indicate that business travel has played a role in the rebound – but cautions that “it may be a long time” before the segment hits 2019 levels.

“Travel considerations have direct implications on the hospitality sector because those who are traveling, whether for business or leisure, drive demand for temporary accommodations,” Jabir writes.

A recent report from the American Hotel & Lodging Association and Kalibri Labs predicts US hotel business travel revenue will be 23% below pre-pandemic levels in 2022 and end the year down more than $20B compared to 2019. Large urban markets that are heavily reliant on events and group meetings will disproportionately have larger shortfalls in business travel revenue this year, the report says, with San Francisco expected to lead the pack.

Hotels have been trading at a heavy discount as of late in Manhattan, with investors betting big on turning a profit once tourism fully bounces back in the Big Apple. Most recently, the Sheraton New York Times Square reportedly sold for half the price the owner paid when it was last acquired in 2006. MCR and Island Capital Group said they paid $373M for the Sheraton.