As Hotel Rates Recover, Amenities Might Lag

Pent-up demand has many business travelers eager to hit the road, but they won’t be alone. They’ll share the road with leisure travelers, for whom the prospect of seeing the people and places they missed during the pandemic is proving impossible to resist.

The surge in leisure demand has helped drive hotel rates close to pre-pandemic highs for some hotel brands. Sunny fourth-quarter hotel earnings pushed forecasters to speed up projections for full recovery. Commercial real estate service CBRE in March revised its recovery timeline for the U.S. hotel industry from 2023 to 2022—projecting rate, occupancy and revenue per available room to reach 2019 levels this year.

Globally, domestic leisure travel is driving the recovery in most markets, similar to patterns emerging in North America. That said, overall performance recovery will be somewhat slower, according to hotel industry data firm STR, with full recovery in the Middle East not expected until 2023, Europe in 2024 and Asia-Pacific in 2025. But particularly in Europe, rate will rise first—before occupancy and RevPAR—led by the U.K., which already has seen rates bounce close to pre-pandemic highs, according to the researcher.

As is the case in the U.S., the hotel industry in the U.K. and Europe has been buffeted by macroeconomic challenges, including supply chain and labor shortages, which are expected to continue even after governments ease two years of travel restrictions and corporate travel gets a jumpstart in 2022. The result of increased labor and supply costs, say many industry observers, will be higher rates passed along to corporates but potentially decreased on-site services as well. Business travelers and travel buyers will need to adapt.