STR Boosts U.S. Hotel Rate Forecast, Cuts Occupancy

Citing still-robust demand but inflationary pressures and a
skittish economic outlook, STR and Tourism Economics on Thursday slightly
raised their forecast for U.S. hotel rates and revenue per available room but
cut projected occupancy levels.

STR and Tourism Economics now project an average 2022 U.S.
daily room rate of $148, up from $145 in their previous forecast, issued
in June. The companies also project an occupancy rate of 63 percent, down
from 63.4 percent in the prior forecast.

The companies project 2022 RevPAR of $93, up from $92 in the
prior projection. The new figure represents an 8 percent increase from 2019.

STR president Amanda Hite in a statement said the firm cut
projected occupancy primarily due to “a slowdown in the economy segment,”
citing inflationary pressures on budget leisure consumers and some travelers
seeking higher service levels.

As for rate, “Inflation remains the key consideration
in our ADR discussions, but hotels continue to display strong pricing power,”
according to Hite. “There are reasons to be concerned about the economy,
continued challenges around labor and business transient still lagging, but the
hotel industry is on solid footing. U.S. profitability hit a 32-month high in
June, and margins have remained strong although some reduction is likely with
higher staffing levels, wages, and costs.”

Tourism Economics parent Oxford Economics “anticipates
slow economic growth in 2023 but not a recession, as a combination of cooling
aggregate demand and easing supply constraints will help slow inflation,” Tourism
Economics director of lodging analytics Aran Ryan said in a statement. “In
this context, with leisure demand supported by solid household finances and an
ongoing recovery of group and business travel, lodging performance gains are
expected to continue, though at a much slower pace than experienced this year.”

The companies’ new projections for 2023 call for an occupancy
level of 64.6 percent, compared with 65.1 percent in the June forecast. They
project average daily rate of $152, compared with $150 in the prior forecast.
The RevPAR forecast of $98, unchanged since June, represents a 14 percent
increase from 2019 levels.

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