Noting that "never in the 29-year history of this publication has the industry been in a comparable situation," PricewaterhouseCoopers in its latest Hospitality Directions U.S. report sharply downgraded its 2020 outlook for the U.S. lodging industry due to the Covid-19 crisis.
The revised forecast shows an anticipated 2020 occupancy level of 38.7 percent, down 41.4 percent year over year. PwC projects average daily rate to be down 19.9 percent to $105.02, and revenue per available room to decline 53.1 percent to $40.66. This compares with the company's January forecast of stable year-over-year occupancy of 66.1 percent and RevPAR growth of 0.7 percent.
While March's declines were "unprecedented," according to PwC, those in April and May were even deeper. Second-quarter RevPAR is expected to drop close to 80 percent year over year, and "in 2020 [it] could fall to a level not seen since 1994."
PwC projects luxury and upper upscale RevPAR in 2020 each to decline by more than 60 percent year over year, with upscale and upper midscale declines in the 51 percent to 56 percent range. Midscale and economy are projected to have the lowest declines, at 32.6 percent and 28.2 percent, respectively.
In 2021, PwC expects demand growth to build as the economy continues to open back up. Year-over-year occupancy is anticipated to increase by 50 percent to 58.1 percent. ADR is expected to increase 10.6 percent to $116.18, and RevPAR is projected to increase 65.9 percent $67.44.
In addition to PwC projections, the outlook takes into account key indicator statistics from STR and an HIS-Markit expectation of an 8.5 percent year-over-year decline in gross domestic product in 2020. HIS-Markit also believes unemployment will peak at 19.6 percent in the third quarter and that it will take four years to again drop to below 4 percent.
Further, "companies may not only continue to restrict corporate travel and events, but also phase the reopening of offices, thereby further delaying corporate-transient lodging demand in metropolitan areas," according to PwC. Also, new hygiene protocols could require "inorganic price adjustments" across rooms, food and beverage, and other departments.
Challenges to PwC's outlook "continue to include political uncertainty leading up to the presidential election, both domestically and abroad; the speed at which the economy recovers; and whether there is a resurgence of the virus later this year or in 2021."
Copyright 2020 Northstar Travel Media, LLC. All rights reserved. From https://www.businesstravelnews.com. By Donna M. Airoldi.