Will the growth in the supply of the accommodation industry outstrip the growth in demand?

The COVID-19 vaccination rate is rising steadily in the United States At its current rate, three in four people, or 75% of eligible residents, will be vaccinated by June. Businesses are reopening. The American economy is now operating at 88% of its pre-pandemic level, with the expectation of continuous improvement.

People want to travel again. In mid-March, Disneyland announced it would reopen April 30. Now all reopening day bookings for single park tickets and park jump tickets are out of print already.

On April 2, the Friday before Easter, TSA reviewed 1.58 million people at airport checkpoints, the highest number since March 12, 2020. By comparison, the TSA only screened 129,763 people (about 8.2% of 1.58 million) on April 2, 2020 .

US accommodation industry posted best weekly performance since March 2020

According to STR, a leading global provider of data benchmarking, analytics and marketplace insights for hotels, the US accommodation industry reported the highest levels of demand and occupancy since the pandemic of the week ending April 10:

  • 59.7% occupancy rate, an increase of approximately two percentage points from the previous week
  • Average daily rate (ADR) at $ 112.22
  • Revenue per available room (RevPAR) at $ 66.99

Over 50% of hotels have an occupancy rate of over 60% for the week. Tampa and Miami, two of the top 25 US accommodation markets, reported 83.7% and 74.1% occupancy, respectively.

Demand for the week ending April 10 has reached 3.2 million room / nights per day, about three times more than a year ago. Only 37 of 166 U.S. markets did not report a weekly increase for this week. Additionally, 46% of all hotels were in the “recovery” or “peak” categories when using STRs. matrix to measure market recovery (i.e. a RevPAR index against the comparable market week in 2019).

Airbnb and Vrbo Actively Recruit More Hosts to Meet Growing Demand for Short-Term Residential Rentals

Home sharing and extended stay sectors are more resilient to the pandemic. Airbnb reservation recovered to its pre-pandemic level in June 2020. Even hotel house-sharing arms are doing well. Likewise, the economy long-stay hotel segment had an occupancy rate of 75.4% when the US accommodation market was operating at 42.2%.

CEO of Airbnb, Brian Chesky, told CNBC As of April 16, Airbnb now had 4 million hosts but would need millions more to meet growing demand. Meanwhile, Expedia vrbo wants Airbnb’s “superhosts” by poaching them with incentives.

The United States opened the most new hotels and rooms in the first quarter of 2021

The United States has opened 220 properties or 26,057 rooms in the first quarter of 2021. The United States leads both China (12,418 rooms) and Japan (2,499 rooms), the second and third countries, with the most new openings with a significant margin. In addition, 186,269 rooms are under construction, with 214,287 rooms in the final planning stage and 237,703 more rooms in planning.

To some extent, construction of new hotels in the United States has already slowed down. The current number of rooms under construction is down 34,000 from its historic high of 220,207 rooms in April 2020. In addition, more hotel projects have become “abandoned” or “deferred” in the past 12 months.

While we are optimistic about the future of the accommodation market, hospitality and travel companies are not expected to experience a full recovery until 2023 or beyond. A full recovery will not take place until groups and business travelers return to hotels. Thus, the addition of the offer could be of concern, even if construction activities have been moderate.

Businesses are now selling real estate at the fastest pace, some of which may add to hotel supply

In the global real estate market, companies sell their assets at the fastest pace. A third of those sales were office buildings, likely because more companies let their employees work from home permanently.

Although it is not known how long the “bleisure” trend of working from home will remain after the pandemic, the accommodation industry is finding ways to embrace such changes. Strategic hoteliers can also take the opportunity to develop their portfolios through Mergers and Acquisitions. Another growth strategy is to convert distressed or distressed office buildings into hotels.

Other buyers may want to turn office buildings into apartments, restaurants, or other commercial space for sale or rental. In 2018, Airbnb started investing in the real estate market, building Airbnb brand apartment projects in cities of the United States. Are Airbnb and Vrbo getting into the game of converting office buildings into rental housing to also meet the growing demand for home sharing facilities?

It is likely that a number of office buildings will be converted into hotels or apartments. Therefore, the housing supply will increase accordingly.

In summary, the accommodation industry is expected to experience growth in both supply and demand. Nonetheless, we need to pay attention to a few critical issues:

  • Will growth in demand from the accommodation industry support growth in supply?
  • What type of hosting products should you consider when planning a new project?
  • What will be the best use of real estate assets?

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