Most economists agree the U.S. will experience a recession to some degree in 2023, but hotel industry analysts say sustainable job growth, strong hotel rates and demand, and the yet-unrealized wave of international travelers will help the industry keep its head above water.

Adam Sacks, president of Tourism Economics, told attendees at the Hunter Hotel Investment Conference that inflation persists as the current cause of “percolating worry.”

“Inflation is the epicenter,” he said. “The latest data shows prices are 6% higher than they were one year ago, and this year, the average household is spending an additional $400 per month on goods and services. Surely this leaves a mark.”

This week, the Federal Reserve raised interest rates in the U.S. by a quarter of a percentage, and the Fed has indicated another similar hike may still be in the cards later this year.

“The housing market is already in recession,” Sacks said. “And manufacturing as well. The cracks in the façade become more evident when you see how households are taking on debt.”

That’s happening mostly in the form of credit card debt, and Sacks credited inflation with affecting how people are spending money and taking on debt.

However, Sacks reminded the audience that even if consumer spending drops, it’s coming from a strong place.

“This recession will be mild because of liquidity,” he said. “Even with all the noise of financial turmoil, households still have an incredible amount of cash on hand.”

Sacks summarized why he thinks this recession will not have a devastating impact on hotel room demand the way past recessions — including those triggered by black-swan events — have:

• Consumer Savings: Even with additional debt and the fault lines of a recession, U.S. households are “in a position of strength,” he said, citing an additional $1.6 trillion in savings that people have today in addition to what they had pre-pandemic. “The main customers of hotels are where these savings reside,” he said. Even if unemployment rates grow a bit in a recession, job growth is still sustainable, allowing people to maintain savings.





• Travel Remains a Priority: The overall intention to travel remains high, Sacks said, and people continue to prioritize travel spending. "Right now, consumers are spending 66% of their consumption on services. Historically, that’s been 70%,” he said. “In one sense, we're saying we expect normalization … which means a further amount of growth in experiential services and travel, as that continues to take share back from goods.”


• Business Travel on the Upswing: Sacks cited data from Tourism Economics and JD Power showing that business travelers plan to surpass 2019 levels of business travel within the early months of 2023.


• International Inbound Travel Still Building: Whatever travel demand the U.S. loses from domestic travelers in the second half of the year related to a recession likely will be replaced and then some by the “prevailing tide” of international inbound travel, which hasn’t yet reached pre-pandemic levels, Sacks said.

By the Numbers

Hotel analysts shared their takes on the rest of the year, diving into forecasts, booking channel trends, alternative-accommodations share and more.

When adjusted for inflation, overall U.S. average daily rate is only about 1% away from 2019 levels and revenue per available room is off by 6%, said Vail Ross, senior vice president of sales and marketing at STR, CoStar's hospitality analytics division.

Demand overall continues to soar, and the country “will reach all new peaks in 2023,” she said. That continues to be driven by leisure demand, but group demand gains ground every month. Large convention cities, such as San Francisco, still don’t have pre-pandemic occupancy levels back, indicating that group travel still has room to grow.

Hotel supply will remain “kept in check,” Ross said, though it is ticking up. Approximately 50% of hotel rooms in final planning and under construction are in the select-service segment, a pattern established well before the pandemic hit, mostly in the upper-midscale and upscale chain scales.



When it comes to travel booking behavior, Kalibri Labs CEO Cindy Estis Green said Kalibri’s data shows that “we’re back to that horse race between brand.com and OTA business.”

Corporate business — including group business — that used to come in via global distribution systems has diffused, and largely comes to hotels through brand.com, voice channels and others, she said. With so many third parties vying for share, it’s important for hoteliers to try to hang on to the channel that is the lowest cost to them, which is typically brand.com, she said.

Robert Mandelbaum, director of research information services for CBRE Hotels Research, said hotels are “starting to see contribution to profitability and revenue growth from other sources,” notably food and beverage. As group business returns to hotels, banquet revenue grows accordingly, enhancing the profitability of the department.

He also cited the continued strength of resort fees, and added that cancellation fees in 2022 were higher than 2019 levels, likely driven by attrition related to groups. “If attendance is not there, or people decide at the last minute not to attend, hotels are earning those attrition fees,” he said.

Jamie Lane, vice president of research at AirDNA, which tracks data and analysis around alternative accommodations such as Airbnb, shared trends in this sector that could have a larger impact on travel and hotels.

Flexible travel that accommodates work-from-anywhere jobs or temporary positions has been on the rise and shows in alternative-accommodation demand, Lane said. In 2022, long-term stays — defined as 28 or more days — accounted for more than 20% of nights booked through Airbnb, compared to 14% in 2019.

Lane said AirDNA data shows strong demand for and increasing supply of alternative accommodations in small cities and rural areas, but supply growth lagging in major gateway markets in the U.S., such as Boston and New York City.