Hotel demand for the 12 months ending February 2023 totaled nearly 1.3 billion room nights, just 2% short of the previous peak set in February 2020, before the COVID-19 pandemic created an industry-wide tumble.

However, comparing current demand to the pre-pandemic peak omits three years of lost growth that, presumably, would have occurred in the absence of the pandemic. Projecting demand growth over the past three years, based on the compound average growth rate prior to the pandemic, finds that U.S. hotel demand is about 7%, or approximately 98 million room nights, lower than it might have been if not for the pandemic.

While leisure travel has experienced a robust recovery, the slow return of business travel, including travel pertaining to conventions and group meetings, has been a key component of the difference between current and projected demand levels.

Demand growth could stumble if the economy slips into a recession later this year, as many economists expect, but this time is likely to be different based on the latest lodging forecast. STR, CoStar’s hotel analytics company, projects demand will rise this year, even though it has declined in every previous recession. Remaining pent-up demand for travel, unspent excess savings accumulated during the pandemic and belief the recession will be mild are all reasons experts expect demand will keep growing in the face of economic headwinds.

At the market level, seven of STR’s top 25 markets have already surpassed their demand peaks from February 2020. The largest increase is in Nashville, where 12-month demand in February 2023 was more than 10% higher than its pre-pandemic peak.

Conversely, none of the top 25 markets has reached its projected demand levels based on each market’s pre-pandemic growth trend. Nashville demand may be 12% above the market’s previous peak, but it is still about 2% below where it would be in the absence of the pandemic. At the other extreme, urban markets heavily reliant on business travel remain the furthest away from reaching their projected demand levels.



Industry-wide demand is forecast to grow this year, despite expectations for a recession. But outcomes at the market level likely will vary. If the drawdown of excess savings supports leisure travel, but the business travel response to a recession is similar to past downturns, the variance in demand recovery between leisure-dominant and business-heavy markets will persist.