Industry NewsCBRE Forecasts RevPAR to Recover by Mid-2023

CBRE Forecasts RevPAR to Recover by Mid-2023

DALLAS—According to CBRE, ADR gains and a 35.1 percent year-over-year increase in hotel occupancy in Q3 2021 showed that demand for U.S. hotel stays endured in the face of the Delta COVID variant. Continued improvement in domestic travel and the rollback of many international travel restrictions have led CBRE to revise its forecast significantly upward in the near- and medium-term. Revenue per available room (RevPAR) is now forecast to reach 2019 nominal levels by the second half of 2023 rather than in 2024, as previously forecasted.

Still, the identification of the Omicron COVID variant and ongoing concerns about the pandemic continue to dampen business, convention, and large-group travel. CBRE expects these categories of travel to accelerate in the latter half of 2022, starting in lower-cost, high-amenity markets. Denser, high-cost-to-operate urban markets dependent on international or large-group travel will likely recover more slowly.

The continuing development of the Omicron COVID variant, as well as the potential for additional novel variants, causes the uncertainty surrounding any forecast to remain elevated. While the hotel sector could face renewed travel restrictions, CBRE expects higher occupancy levels from an increase in inbound international and business travel in 2022.

Room rates will lead the hotel industry’s recovery. According to CBRE Hotels Research’s December 2021 edition of Hotel Horizons, ADR reached 2019 nominal levels in Q3, and CBRE expects ADR will continue to exceed 2019 levels, followed by a demand recovery in early 2023. Pent-up demand for leisure destinations, an increase in household personal savings, and fewer constraints on availability compared with earlier in the pandemic contributed to the brisk pace of ADR recovery. The resumption of inbound international travel will help gateway markets regain occupancy in the coming year.

Moving forward, existing hotels will benefit from below-average new construction deliveries, as the cost and availability of construction inputs, including labor, will restrict supply growth from 1.2 percent to 1.3 percent through 2025. This is well below the long-run average of more than 2 percent.

“Typically, when recovering from downturns, ADR growth lags occupancy gains,” said CBRE’s Head of Hotel Research & Data Analytics Rachael Rothman. “The trend has reversed this cycle, owing to strong leisure demand and a nascent recovery in corporate and group demand.”

Revenue management focusing on rate rather than occupancy, as well as continued staffing difficulties, may prevent occupancy from reaching the highs of the last cycle; however, an ADR-led rebound contributes to faster recovery of profits.

RELATED ARTICLES

RateGain Integrates With Cloudbeds to Enhance Hospitality Distribution

SAN DIEGO, California—RateGain Travel Technologies Limited (RateGain) announced a strategic partnership with Cloudbeds. This collaboration brings together two industry leaders to enhance how hotels,...

Former Shangri-La Vancouver Joins Hyatt Portfolio

CHICAGO, Illinois—Hyatt Hotels Corporation announced plans for a luxury Park Hyatt hotel in downtown Vancouver, slated to open in 2026. The hotel, formerly Shangri-La...

JLL Arranges Refinancing for Baron’s Cove

NEW YORK CITY, New York—JLL’s Hotels & Hospitality Group announced that it has arranged refinancing for Baron's Cove, a 67-room luxury boutique hotel in...

Hyatt Highlights Growth in Asia Pacific, Expects Multiple Openings

CHICAGO, Illinois—Hyatt Hotels Corporation announced plans to expand Hyatt’s luxury and lifestyle brand portfolios across the Asia Pacific region, with a pipeline of close...

Shiji Upgrades Reviewpro Reputation’s AI Responses

HOLLYWOOD, Florida—Shiji announced a significant upgrade to Reviewpro Reputation's AI Responses feature. With one click, hoteliers can generate context-aware response drafts aligned with tone...

Aspen One Announces Limelight Charleston, the First East Coast Limelight Property

CHARLESTON, South Carolina—Aspen One, the parent company of Aspen Snowmass, The Little Nell, Limelight Hotels, and Aspen Collection, announced the latest addition to its...