US Hotel Market Trends & Analysis

U.S. Hotel Market Trends During an Abnormal Economic Recovery

The U.S. is experiencing an economic recovery unlike any other in recent memory…and the news is not all good. Yes, the economy is expanding on the strength of increased spending. And yes, the Fed’s massive monetary stimulus has alleviated the pain from the pandemic shutdowns that inflicted such major damage on U.S. supply chains. However, there still are 7.6 million more people unemployed than in pre-pandemic February 2020. The shutdowns damaged the supply chain and a slow-to-return labor force is imperiling its mending. Alas, the slowed production of goods and services continues to lag the brisk demand for them. Limited supply and pent-up demand equal higher prices – inflation.

What makes this recovery so abnormal is that fewer people are working to produce the goods and services needed to satisfy pent-up demand. So long as the government pays people not to work, collectively giving them the means to buy things they do not produce, there will be shortages. In effect, too much money will be chasing too few good and services, a traditional textbook definition of inflation, which, if more than transitory, generally forces the Fed to increase interest rates.

The uneven U.S. economic recovery is reflected in eight revised hotel performance forecasts by STR and Tourism Economics over the past 16 months. While unemployment exceeds February 2020, labor shortages will continue to plague the relatively low-paying, high-contact hospitality industry as least through the peak summer months. Though widely available vaccines are expected to stimulate more leisure and corporate travel, and while consumer optimism continues to rise, lodging’s outlook is for a rocky recovery.

Below are the KPI forecasts for 2021 and 2022, respectively:

• Occupancy: 53.3% and 60.1%¹
• ADR: $109.47 and $117.34¹
• RevPAR: $58.39 and $70.57¹

¹ Source: STR and Tourism Economics