What is the hotel outlook for 2023?

Room rates increased by over 10 percent in Q1 2023, with RevPAR slightly higher than expected. However, adjusted for inflation, room rate, and RevPAR are still below 2019 levels, and it is unlikely that 2019 results, in real terms, will be achieved until 2026.



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We are lowering our 2023 RevPAR growth forecast from 6.0% to 4.6% owing to a weaker-than-expected Q2 2023. Early indicators of property distress are increasing. Profit declines are contributing to an uptick in delinquencies, from 5.4% to 5.9%. This could be a precursor to increases in special servicing down the road.

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Supply and demand imbalances aside, hotels are facing other challenges this year thanks in large part to persistently high inflation. “Hotels are faced with rising energy costs to heat and cool along with the rising cost of goods and services,” Hayley Berg, lead economist at Hopper, tells Money.

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There will be pent-up demand for travel and leisure activities after the lockdowns are fully lifted. The research group IBISWorld predicts a rebound for the U.S. hotels and motels industry after the pandemic, with steady growth through 2025.

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Leisure and hospitality projected to mostly recover pandemic-driven employment losses. The Bureau of Labor Statistics projects the U.S. economy to add 8.3 million jobs from 2021 to 2031. Of those, 1.9 million jobs—23.1 percent of all new jobs projected—are expected to be in leisure and hospitality.

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For 2024, the RevPAR growth projection was also lowered 0.5ppts on a 0.5ppt downgrade in occupancy. Average daily rate (ADR) was upgraded 0.1ppts for 2023 but kept flat for 2024. “We brought down our growth projections with the industry in a period of normalization,” said Amanda Hite, STR President.

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According to the HospitalityNet report, travel suppliers expect fuel prices to increase by 20% in 2023, which will result in higher airfare, car rental prices, and hotel rates. The high cost of electricity and fuel will impact business travel budgets, making it difficult for companies to manage their travel expenses.

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By 2030, there will be 1.9 billion international arrivals and world tourism receipts will grow to US $2 trillion. China will be the world's largest receiver of international tourists and the United States will be the largest economy in terms of international receipts.

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If you thought 2022 was an expensive year to travel, get ready to spend even more in 2023. New data from travel site Hopper shows that U.S. hotel prices averaged $212 per night in January — that's 54% higher than the same month in 2022. Planning on taking a trip soon?

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“We are going to continue to see room rates grow just below the level of inflation,” Freitag predicts—an expectation he and other experts say could continue even if the economy does enter a recession. Still, hotel rates are undeniably elevated right now.

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Hopper's analysis identifies two main factors that account for the sharp rise in hotel prices: High occupancy: As the travel industry rebounds in the aftermath of the COVID-19 pandemic, millions of people are vacationing again. Hopper is expecting high demand for hotel rooms throughout the year.

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In the 2030s, the best hotels will offer highly personalized guest experiences, sustainable travel options, and attractive employee opportunities.

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