Amid a continued nationwide surge in Covid-19 cases, STR and Tourism Economics have slightly downgraded their U.S. hotel forecast for 2021, with full recovery of the sector's average daily rate (ADR) expected to take longer than previously projected.
Nationwide ADR was down 21.3%, to roughly $103, for 2020. For 2021, STR and Tourism Economics now predict ADR will increase by just 4.3% this year, versus a prediction in October of close to 6%.
"The question is, when are we back to  levels?" asked Jan Freitag, senior vice president of lodging insights for STR, during an analyst call on Wednesday. "We're suggesting that room demand will be back to 2019 levels by 2023. But we're also suggesting that ADR at 2019 levels is not in our forecast horizon -- we're not forecasting that far out. That is what's going to give owners pause, because obviously you need ADR to profit."
U.S. RevPAR is similarly expected to remain below 2019's record-high levels through 2023. In 2020, the industry saw RevPAR drop by 50.1%, to around $43. This year, STR projects that RevPAR will grow 21.6%.
Key performance indicators: Last year and projected for 2021 and 2022. Photo Credit: STR
Demand, which was down 35.7% for 2020, is predicted to rebound 18% this year, while occupancy, which fell 36.6% nationwide last year, is projected to grow 16.6% for 2021.
Supply is expected to increase by 5.4% this year, after shrinking 3.6% in 2020.
Among the U.S. hospitality sectors expected to see the slowest turnaround in 2021 are the luxury and upper-upscale chain scales, according to Freitag.
"Because [those hotels] are disproportionately located in the larger markets and disproportionately reliant on group demand, their RevPAR got hit disproportionately hard," said Freitag. "The Top 25 markets will not really recover until vaccinations [roll out] and corporate transient travelers return."
Hotels in Top 25 markets like New York City, Chicago, the island of Oahu, Washington D.C., Boston and San Francisco/San Mateo and Anaheim/Santa Ana, Calif., have remained particularly challenged this winter, with occupancy across those destinations hovering at below 30% in December.
Additionally, several of the nation's largest markets have a relatively high share of rooms that remain offline. STR estimated that approximately 28% of rooms remain closed in New York City, and around 24% of rooms aren't currently available in San Francisco/San Mateo.
Freitag, however, predicts that despite the difficult landscape, those closures are likely temporary.
"We are not big believers in this flood wave of closures washing over the U.S. hotel industry," said Freitag. "I think they are closed today, but six months from now, if there's an asset in pretty good shape in a Top 25 market, and we're seeing some corporate transient demand return, will there be someone stepping in to revitalize that hotel? I think the answer to that is yes."