Hotel Recovery Chugs Along, but Inflation and Labor Are Ongoing Concerns – Travel Weekly
As the hotel industry gathered for the Americas Lodging Investment Summit this week, it served as a chance to dive into projections and analysis for the year to come, and a consensus has emerged on both the recovery and the stumbling blocks ahead.
Leisure demand continues to drive the return to travel, while progress is underway with business and group bookings, but the largest events and companies have been some of the slowest to return.
Meanwhile, as rate and revenue growth remain promising, there is widespread concern over inflation, a persistent labor shortage and the next Covid-19 variant or development.
“It’s been a strong recovery, but there are still some bumps in the road,” said STR senior vice president Carter Wilson. “December was the strongest month the industry has had during the entire pandemic. And the week between Christmas and New Year’s recorded the highest ADR (average daily rate) of any week ever. So, the leisure demand is not that deterred by omicron.”
Room rates are steady
One positive point throughout the pandemic for hotels has been the stability of room rates, which in many destinations have risen. The average daily rate across the industry in 2021 was $125, according to STR, and is expected to climb to $134 in 2022. Revenue per available room is also expected to rise from $72 in 2021 to $86.
“It’s the first time in a downturn that we’ve been able to hold rate, and now we’re in a position to drive rate,” said Warren Fields, CEO of Benchmark Pyramid.
However, Wilson said the industry should be prepared for some positive signs of recovery to trigger what may look like negative momentum on key hotel data points such as ADR.
“I think we’ll see a softening in rate as groups come back,” Wilson said.
Inflation and the labor shortage
That is not the only place where rebalancing may first appear negative. Cindy Estis Green, CEO of Kalibri Labs, reminded the ALIS audience that for the last two years the U.S. traveler has had few options outside the country, so some domestic demand may shift toward international destinations, but in turn the U.S. is anticipating its own growth in foreign tourism this year.
Overall, business travel remains 20% below previous levels, and while leisure travel has driven returns to 2019 RevPAR levels, only 58% of meetings and events are expected to return by the close of 2022, which heavily impacts hotel revenue on rental fees and food and beverage sales.
While the dollar figures are returning to pre-pandemic levels, all of the analysts said inflation will play a large role in determining when a full rebound has occurred, which is still two to three years away according to an STR and Tourism Economics analysis.
“Inflation will make 2022 look very different from 2019,” Larry Cuculic, president and CEO of Best Western Hotels said. “That puts pressure on labor, puts pressure on supply, and the cost of doing business. So, while topline might look similar or slightly better, from our perspective what we’re concerned about is bottom line for our hoteliers.”
Cuculic and other hotel executives also said labor continues to be among the top issues confronting the industry, as U.S hotels are projected to end 2022 with 166,000 fewer workers than they had in 2019, a 7% decline.
“There’s not one solution,” said Sloan Dean, CEO and president of Remington Hotels. “And I think it’s going to be a problem for not only this year but for many years.”
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