Hotels Faring Better With Growth Ahead

Luxury properties are outperforming others.

By Ermengarde Jabir, Ph.D., an economist with Moody's Analytics REIS.

As pandemic-related cases and restrictions have dropped in 2022, the traveler recovery rate has remained near or above 85%. Both leisure and business travel have contributed to a healthy and sustained rebound in traveler numbers. However, it may be some time before business travel reaches its 2019 levels.

Hotel performance has varied tremendously by asset tier and has been subject to variant concerns. Since mid-2020, luxury properties have remained above their counterparts in terms of revenue per available room, also known as RevPAR. More interestingly, while the lower tier’s RevPAR fell sharply in the second half of 2021, upper-tier assets maintained their gains in 2021, with minimal impact on RevPAR.

Occupancy tells a different story, though. While upper-tier properties typically have the highest occupancy rates, they are also the most severely affected by downturns in demand. This is likely because they don’t have the margins to lower average daily rates to bolster occupancy.

Moody’s Analytics CRE predicts that across all tiers, occupancy is expected to grow steadily through 2022 and into 2023 before leveling off and remaining stable after the recovery growth period. But be sure to watch jobs data. Labor is a crucial component of the conversation around performance in the hotel sector.

Adapted from “Room for Growth,” by Ermengarde Jabir, Ph.D., published in the CCIM Institute’s CIRE magazine, Spring 2022. Jabir is an economist with Moody’s Analytics REIS.

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.

Advertisement

About Create

Create is a quarterly publication for commercial practitioners, members of the National Association of REALTORS® and commercial real estate industry leaders. Members can subscribe by updating your member profile information to include commercial interests in the "Field of Business" list.

Update your Field of Business in your member profile.