The hotel market recovery could be slower than initially expected. New research from Fitch Ratings has found a lack of meaningful demand in the upper-tier hotel market, which could prove to slow the recovery in the US lodging market. As a result, the firm is decreasing its revPAR expectations for 2021 and maintaining its 2020 outlook. However, this adjusted outlook will not trigger downgrades due to cost controls, and the firm maintains that the market will recover in 2022 and 2023.
So far, hotel performance in 2020 has been on par with Fitch Ratings’ initial projections. As a result, the company maintains that 2020 revPAR will decline 45%, however in 2021, the firm now expects the market to rebound to 75% of 2019 numbers. This is a downgrade from Fitch Ratings’ initial expectation of an 80% rebound in 2021 of 2019 numbers. By 2022, Fitch expects 15% growth of revPAR and in 2023, revPAR growth of 8%.
The upper-tier and luxury markets have seen little demand since the onset of the pandemic, and the market segment is not likely to see a meaningful recovery in the near-term, according to Fitch Ratings. As a result, the firm has increased the recovery timeline for both luxury and upper-tier properties. It predicts that upper-tier performance will lag through mid-2021. Low international tourism and an economic contraction will both put downward pressure on this market. Overall, Fitch predicts a 60% decline in revPAR for upper-tier properties, a slow start to 2021 and a recovery of 60%of 2019 revPAR numbers in the second half of 2021. By 2022 and 2023, the market segment should trend with the national hotel performance.
While the outlook for hotel properties shows a light at the end of the tunnel, with recovery beginning in 2021, today, the hotel market is in a sire state. Data from AHLA shows that 65% of hotels are at or below 50% occupancy, which is below the most hotel’s breakeven and debt repayment point. While AHLA also predicts that hotel performance will improve in 2021, it also fears that some hotels might not make it to the recovery point. The organization estimates that thousands of hotels are nearing permanent closure.
The trend seems to continue through 2020. For the Thanksgiving holiday, only 35% of Americans expect to travel, and for Christmas, only 29% of Americans plan to travel. These are similar declines to Labor Day with only 16% of American travels, compared to 41% in 2019. This impact has been felt in markets throughout the country. Hawaii has seen the sharpest decline in hotel performance, followed by Orlando, Florida, Boston, Miami and St. Paul, Minnesota.
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September 30, 2020 at 06:10PM
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Hotel Recovery Slower Than Initially Expected - GlobeSt.com
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