Hotels in Urban Locations Continue To Struggle
U.S. hoteliers had plenty to celebrate in 2022, including record-high average daily rate and year-over-year increases in occupancy and revenue per available room.
In his monthly video analysis of U.S. hotel performance, CoStar's National Director of Hospitality Market Analytics Jan Freitag said U.S. hoteliers sold 1.2 billion rooms in 2022, 11% more than in 2021. Room rates hit an all-time high of $149 and RevPAR was $93, up 30% year over year.
Demand for hotel rooms — or the number of room nights sold — recovered to 2019 levels in December. For the full year, the difference between 2022 and 2019 was only 30 million room nights, and that gap is shrinking each quarter, he said.
The industry’s demand recovery has played out differently depending on a hotel’s location and price point, Freitag said.
Hotels in “urban locations are still hurting — and likely will for a while until we figure out collectively what 'return to office' looks like,” he said. “That means that upper-upscale hotels that cater to business travelers are also impacted.”
Strong leisure demand supports hotels in resort locations and in the luxury class, but Freitag said he’s curious how a recession will affect their performance. Small- and medium-size businesses so far have driven the business travel recovery, and suburban hotels and midscale hotels have benefited from that trend, he said.
The questions that remain for demand in 2023 are whether corporate travelers will return and if there’s still gas in the tank for growing leisure demand during a recession.
On the topic of leisure, Freitag said that STR and CoStar have new data available about the Las Vegas market. Results for 2022 show room rates grew 23% while occupancy increased by 16%. Las Vegas was also included in STR’s top 25 markets list.
On the real estate side, the U.S. hotel pipeline has not moved much, Freitag said. The number of hotels in construction stands at 159,000 rooms, relatively flat year over year.
“The early planning count shows developers are ready, but I assume that interest rates have to ease before these projects break ground,” he said. “Well, if you can’t build it, you’ll have to buy.”
Fourth-quarter 2022 hotel transactions reached $11 billion, down from the $15 billion recorded in the first quarter, he said, but the pace and value of transactions are on an upward trajectory for 2023.
Copyright 2023 CoStar Group. All rights reserved. From https://www.costar.com. By Bryan Wroten, Hotel News Now.