According to a recent analysis by Marcus & Millichap, GlobeSt. reports. Room rates are currently within 3% of their all-time high, while occupancy is up 2,000 basis points from the low point it hit during the pandemic.
On the other hand, employment in the industry is 20% below pre-pandemic levels, which has made it difficult for hotels to service all of their rooms. Paying higher salaries to the staff they have has resulted in higher room prices. With mask mandates mostly lifted, Marcus and Millichap noted that expectations for summer travel are high.
Here are three reasons why hoteliers are optimistic about a full industry rebound.
Increase in sales volume
Hospitality sales volume increased 111% in April year-to-date, Kevin Davis, CEO Americas, JLL Hotels & Hospitality Group, told GlobeSt.com.
“We’re seeing a continuation of the strong performance of drive-through leisure resorts and also seeing a recovery in urban markets and hotels that are meeting transient demand from groups and businesses,” Davis said. “In fact, through the end of April, RevPAR in urban markets grew more than any other type of US market. As more businesses return to the office and COVID restrictions are fully eased, we expect this urban recovery to strengthen.
Summer trips are back
After a two-year slowdown, it looks like summer travel is approaching pre-pandemic numbers, according to David I. Haas, partner at Duane Morris.
“Hotels are freed from the chains of COVID for the past two years and more,” Haas told GlobeSt. “Everyone seems to be traveling somewhere this summer. So far, the summer travel virus is supplanting inflationary pressures on consumers who have already made their summer travel plans and are sticking to them.
Meanwhile, Shawn Gracey, executive vice president of Key International, noted that the increase in summer travel is also partly due to people’s “pent-up” demand for a getaway, particularly to destinations in outdoors, whether in nature or on the coast.
“The hospitality industry will continue to see steady growth with increased domestic and international travel,” Gracey said.
It also helps that the leisure and extended stay sectors are two of the most resilient asset classes in hospitality, according to RREAF Holdings Chairman and CEO Kip Sowden.
“Whether it’s leisure hospitality assets or extended stay assets, these are critical areas that will continue to thrive despite inflationary pressure,” Sowden told GlobeSt. “For example, beachfront resort properties are hotels that tourists will flock to now that summer is here.”
Better crisis preparedness
Hotel room rates haven’t faltered much during the COVID-19 pandemic, especially in the economy and mid-price sectors, according to Ryan McAndrew, senior real estate analyst at RSM US. Rates remain high during the health crisis, in part because hotel management and owners have recognized that pricing power was obtained during the Great Financial Crisis and have a plan in place to remain stable throughout the crisis. reprise.
“Hoteliers were well aware that demand for rooms was artificially flattened due to COVID-19 lockdowns, so there was little incentive to lower rates to increase traffic,” McAndrew told GlobeSt. “As a result, rate growth is expected to continue across all hotel segments driven by strength in leisure travel and the return of international, group and business travellers.”
Some concern remains
While hoteliers remain optimistic about an industry-wide recovery, there could still be bumpy roads ahead. Many jobs lost in the hotel industry have still not been replaced, for example. Meanwhile, declining revenue for hotel owners during the pandemic has made it harder to keep track of the upkeep and active management needed to make their properties profitable. Such problems could lead to a market including struggling hotel sales, according to Desi Co, managing partner at Accord Group.
“Even if the hospitality industry recovers, in some cases hotel groups will not have enough time to refinance existing debt or make necessary capital improvements that have been neglected over the past two years,” said Co.