The continued rollout of COVID-19 vaccinations and additional stimulus funds have strengthened the foundation for the recovery of the U.S. lodging industry. According to the February 2021 edition of Hotel Horizons, CBRE Hotels Research is forecasting an average national hotel occupancy level of 43% during the first half of 2021, accelerating to 55.1% in the second half of the year.
Occupancy in the Phoenix and Greater Los Angeles markets this year is expected to outperform national levels at 57.2% and 56.7%, respectively. Revpar, a combination of average daily rate and occupancy, is expected to climb this year by 16.6% to $70.46 in Greater LA and by 25.6% to $69.04 in Phoenix. By 2024, Phoenix occupancy is expected to be back at 70.3% and in the Greater LA region at 79.1%.
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“We are increasingly optimistic about the pace of lodging recovery,” said Jeff Lugosi, executive vice president and practice leader of CBRE Hotel Advisory, West Division. “Although fundamentals remain well below their 2019 peak, we are seeing a pick-up in current trends and solid improvement in leading indicators of travel demand.”
He added, “In fact, earlier this week, CBRE’s Chief Economist Richard Barkham raised his forecasts for both GDP growth and employment, two primary drivers of lodging demand. The acceleration in recent trends has been fueled by a faster-than-expected vaccine roll-out, additional stimulus, and strengthening leisure demand and we expect fundamentals to continue as we move through the year.”
CBRE advises hotel owners and operators to evaluate performance by location, property type and chain scale, and 2021 is no exception.
“Upper-priced properties will see faster growth in 2021 fueled, by easier comparisons and an uptick in business and leisure travel. However, occupancy levels still will trail those of the mid- and lower-tier properties,” said Rachael Rothman, Head of Hotels Research & Data Analytics for CBRE.
RevPAR gains will vary widely by market as well. Hotels in markets such as Minneapolis, Washington, D.C., Boston, Chicago and Philadelphia are expected to enjoy RevPAR gains of more than 50.0% during the year. However, results still will fall meaningfully short of prior peaks. By year end, smaller cities like San Bernardino, Dayton, Oklahoma City, Virginia Beach and Savannah will be closer to returning to 2019 RevPAR levels than other markets.
Growth Beyond 2021
CBRE’s February 2021 forecast calls for a return to 2019 RevPAR levels in 2024. In general, properties that operate in the lower-priced chain-scale segments will recover sooner than the higher-priced hotels.
One factor supporting enhanced lodging performance in the second half of this year and beyond is a reduction in the traditional lodging supply. The combination of permanent closures and fewer projects starting construction has resulted in a reduction of CBRE’s hotel supply forecast for 2021 to a gain of just 0.9% for the year. CBRE estimates supply growth will remain below 1% through 2023.