Originally seen HERE.
As the ALIS Conference kicked off at the JW Marriott/Ritz-Carlton Los Angeles L.A. Live today, the American Hotel & Lodging Association released its 2022 State of the Hotel Industry report, developed with Accenture.
According to the report, the travel outlook for 2022 is “trending positively,” but the association expects “continuing volatility,” with full recovery still years away.
“Hotels have faced enormous challenges over the past two years, and we are still a long way from full recovery. The uncertainty about the omicron variant suggests just how difficult it will be to predict travel readiness in 2022, adding to the challenges hotels are already facing,” Chip Rogers, president and CEO of AHLA, said in a statement. “The slow return of business travel and fewer meetings and events continue to have a significant negative impact on our industry. The growth of leisure and bleisure travel represents a shift for our industry, and hotels will continue evolving to meet the needs of these ‘new’ travelers.”
“Travel and hospitality brands still face an uncertain marketplace, but all these changes also herald a new era of opportunity to drive long-term customer loyalty. They should flex with demand and respond to the added complexities and volatility in travel by delivering a ‘travel partner’ mentality to their leisure and business customers,” said Liselotte De Maar, managing director in Accenture’s travel industry. “Travelers are now not only focused on price and quality of a location, but also on cleanliness and sustainability values and impact, and expect a clearer, more digital service. Companies will need to continue to digitally transform, reinvent their loyalty model, as well as rethink the employee proposition, if they wish to thrive.”
Metrics
Occupancy rates and room revenue are likely to approach 2019 levels in 2022, but the outlook for ancillary revenue is less optimistic. Business travel is expected to remain down more than 20 percent for much of the year, and only 58 percent of meetings and events are expected to return.
According to an analysis for AHLA by Oxford Economics, hotel room night demand and room revenue are projected to nearly return to 2019 levels in 2022. Room revenues are likely to reach $168 billion, within 1 percent of 2019 figures and an increase of 19 percent compared to 2021. Occupancy is projected to hit 63.4 percent, nearing the 66 percent rate achieved in 2019 and far above the 44 percent and 57.6 percent reached in 2020 and 2021, respectively.
Labor headwinds will mean employment levels at year end will be down 7 percent compared to 2019.
Volatility
While the Association notes that the return of room revenue is “welcome news” for hoteliers, the figures do not account for the additional estimated $48+ billion in prepandemic spending on food and beverage, meeting space and other ancillary services—a revenue source expected to lag significantly in its return. Only a little over half of meetings and events will return in 2022, with the negative impacts of the omicron variant still to be determined.
Similarly, hotels across the country are continuing to dig out from a two-year period in which they lost a collective $111.8 billion in room revenue alone, and a partial recovery in 2022 will not be enough to allow owners to completely pay back lenders, fully rehire staff, invest in delayed property improvements and refill business cash reserves.
While leisure travel will likely return in full this year, AHLA expects business travel to remain significantly below pre-pandemic levels. Moreover, future variants will create volatility in both the return of leisure and business travel, and tens of billions of dollars connected to meetings and events spending. According to Cvent’s November 2021 Group Business Insights Report, one quarter of meetings being sourced are hybrid, and 72 percent of surveyed meeting planners are sourcing events with an inperson component.
Hotels will continue to struggle with staffing shortages, reducing their ability to maximize revenue from potential travelers. Inflationary pressure means that though a nominal recovery may occur earlier, true adjusted recovery for the industry will take until 2025, according to STR and Tourism Economics.
