Based on stronger than expected performance during the first quarter of 2021, plus encouraging economic and vaccination news, CBRE Hotels Research forecasts U.S. lodging demand will return to pre-pandemic levels by the fourth quarter of 2023.
The strength in lodging demand will support pricing, but occupancy gains will be somewhat offset by new supply, as fewer development and conversion projects were sidelined than previously forecasted. As a result, the recovery in occupancy will not occur until the fourth quarter of 2025 due to greater supply growth during the 2020-2022 period than coming out of prior recessions. The net result is a return of 2019 revenue-per-available-room (RevPAR) levels in the third quarter of 2024.
According to CBRE Hotels Research’s June 2021 edition of Hotel Horizons®, the average daily rate (ADR) for U.S. hotels will return to 2019 nominal levels by the first quarter of 2024. That trails the recovery in lodging demand by only one quarter. After suffering a 22.5-percent ADR decline during 2020, U.S. hoteliers are seizing the opportunity presented by the bounce back in demand by maximizing room rates as much as possible. CBRE projects a 4.3 percent increase in ADR for the entirety of 2021, followed by a 11.4-percent rise in 2022. Previous research shows that strong ADR growth helps improve flow-through, supporting a recovery following the 80 percent decline in gross operating profits suffered last year.
A headwind to the strengthening demand is a forecast 2.1-percent lodging supply increase for 2021. Most properties that closed in 2020 have opted to reopen in response to the accelerated growth in demand. Concurrently, delays in the delivery of furniture, fixtures and equipment, along with construction labor shortages, pushed the opening and reopening of new and renovated properties into this year.
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