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October 27, 2020
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After Depressed Second Quarter, U.S. Hotel Industry is on Recovery Path

9/25/20

This report provided by CBRE.

After facing the lowest occupancy levels since the 1930s and the greatest declines in revenues and profits ever experienced in the second quarter, the U.S. hotel industry is poised to begin a multiyear recovery in the third quarter.

According to Kalibri Labs, the number of room nights occupied in U.S. hotels during the second quarter was 60% less than a year earlier. With such a dramatic decline in demand, the national occupancy level for the quarter was just 28.3%. It is estimated that 15% of U.S. hotels were forced to close for some portion of the three-month period.

“Fortunately for U.S. hoteliers, indicators of market recovery began to emerge during the quarter,” said Jamie Lane, Senior Director of CBRE Hotels Research. “After bottoming out in April, lodging demand increased 83% in May and June. This mini surge in demand was fueled by leisure travelers looking to escape the bonds of home quarantine for safe and healthy rural and resort destinations.”

Beyond last quarter’s nadir, CBRE Hotels Research is forecasting continued improvement in U.S. lodging performance through the remainder of the year and beyond. According to the Q2 2020 edition of Hotel Horizons®, U.S. hotel occupancy should average 39.8%, along with an average daily rate (ADR) of $104.10 for 2020. The net result is an annual RevPAR level of $41.46, which is 52.5% less than the $87.22 RevPAR posted for 2019.

In the Greater Los Angeles region, overall occupancy for this year is expected at 45% with average daily rates down more than 26% at $129.12. Steady increases in demand are expected starting next year and will eventually lead to an occupancy rate of 80.3% and an ADR of $186.82 in 2024.

“While the performance of the local hotel industry will be well below historical long-term averages, we believe the worst is now behind us in our region,” said Los Angeles-based Managing Director at CBRE Hotels Advisory, Brandon Feighner. “The recovery will vary market to market and even by property type, with smaller and leisure-oriented hotels at the forefront and large group hotels lagging.”

He added, “Until a vaccine is available, hoteliers will be focused on local and regional demand rather than long-haul and international markets. As the national and local lodging industries recover, we anticipate that the Greater LA region will once again be one of the nation’s best-performing and attractive to developers and investors.”

Recovery patterns vary by chain-scale. Occupied room nights for hotels in the upper-midscale segment are projected to return to 2019 levels in 2022, while luxury and upper-upscale demand will lag until 2024.

New Data Provider, New Insights

This quarter, CBRE and Kalibri Labs agreed to provide historical lodging performance data to underpin its Hotel Horizons® econometric forecasting model. As of June, Kalibri Labs collects daily transactional booking data from approximately 34,500 hotels offering more than 3 million guest rooms across the U.S. With this partnership, CBRE gains insights into how guests book their hotel rooms, the lead time for making their reservation, the length of time they stayed in the hotel, and the price paid to the intermediary used to book the room. The Kalibri Labs data set also enables CBRE to more clearly demonstrate the disparities by market.

“The Kalibri Labs data has been extremely useful in 2020 as we attempt to understand the real impact of the COVID-19 virus on travel patterns. For example, the global distribution system (GDS) and group booking channel information lets us make assumptions regarding the pace of recovery for markets and segments that are dependent on corporate and group demand,” Mr. Lane said.

Cindy Estis Green, CEO of Kalibri Labs, said, “Even before COVID, the operating environment had become more complex and more expensive as the booking process has moved online and the data is now available to illustrate the demand drivers and their costs. Key market drivers can be clearly defined and as a result, CBRE’s important projections for the future can be considerably more refined and accurate.”





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