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2022 RevPAR Expected to Rise Above 2019 Levels

NEW YORK CITY— Continued improvement in top line metrics for U.S. hotels is expected for the remainder of this year and next, despite an initial pull back in the recovery timeline due to a surge in COVID-19 infections in December and January.

While leisure travel continued to drive much of lodging’s demand in Q1, individual business travel and group business have started to emerge heading into the warmer months. Strong leisure business is expected to cause demand compression over the summer, driving room rates and resultant RevPAR levels to new highs, according to PwC Hospitality Directions’ near-term outlook for the U.S. lodging sector.

A stronger Q4 driven by a resurgence in business transient and group demand is expected if tensions ease in Ukraine, and if immunity levels continue to increase domestically. Annual occupancy for U.S. hotels this year is expected to improve slightly from PwC’s November 2021 outlook, increasing to 63.1%.

As in the last outlook, the big story is room rates. Average daily room rates surpassed comparable 2019 levels in every month of Q3 and Q4 last year, and in February, March and April this year (January missed by $0.28). RevPAR in March and April exceeded comparable 2019 levels, a trend expected to continue through the forecast period. PwC now expects average daily room rates to increase 16.9% for the year, with resultant RevPAR up 28.1% approximately 106% of pre-pandemic levels, on a nominal dollar basis.

“Despite volatility in the financial markets and heightened concerns over the humanitarian crisis in Ukraine, we now expect U.S. hotels to surpass 2019 RevPAR levels this year, driven by strong growth in room rates stemming from focused revenue management strategies of operators,” said Warren Marr, U.S. hospitality and leisure managing director.

Trends and highlights

  • Lodging’s recovery could still be bumpy this year, with slowing vaccinations rates (66% of the U.S. population was fully vaccinated as of May 17, 2022, according to the Mayo Clinic) and new variants continuing to infect, coupled with volatility in the financial markets and geopolitical stress resulting from Russia’s invasion of Ukraine.
  • In 2023, PwC expects demand growth from individual business travelers and groups to more than offset a potential softening in leisure demand (as international leisure travel continues to recover and people who took vacations domestically over the past two years, venture abroad). Growth in both occupancy and ADR is expected, with a year-over-year rebound in RevPAR of 6% – approximately 114% of pre-pandemic levels.
  • Challenges to this outlook include the ongoing conflict in Ukraine, potential impact of the Fed’s increases in interest rates on the U.S. economy, and any new variants of the virus.

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