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IN RECENT WEEKS, CBRE Hotels Research has revised its forecast for the hospitality industry upward in light of several factors, such as rising occupancy levels, improvement in domestic travel and some opening in international travel. Recent developments, however, including the rise of the Omicron variant of the virus that causes COVID-19, elevates the uncertainty level of those forecasts, but still the industry is expected to return to 2019 levels by the second half of 2023 rather than 2024. Hotel occupancy in the third quarter rose 35.1 percent over the previous year, according to CBRE's December 2021 edition of Hotel Horizons. ADR also saw gains, reaching 2019 nominal levels in the third quarter. "CBRE expects ADR will continue to exceed 2019 levels, followed by a demand recovery in early 2023," CBRE said in a statement. "Pent-up demand for leisure destinations, an increase in household personal savings and fewer constraints on availability compared with earlier in the pandemic contributed to the brisk pace of ADR recovery. The resumption of inbound international travel will help gateway markets regain occupancy in the coming year."

THE U.S. HOTEL industry is on track to full recovery from the COVID-19 pandemic, according to STR's latest industry forecast. Progress may be uneven, however, as some obstacles, such as labor costs, still remain. ADR will near full recovery in 2022, averaging $130 while occupancy for the year is predicted to reach 63.4 percent. RevPAR's average for the year is set to be $82,down 4 percent compared to 2019, but it is expected to be fully recovered in 2023, according to the forecast given at the 43rd Annual NYU International Hospitality Industry Investment Conference. STR and Tourism Economics said changes in the nation's economy warranted the new forecast. "We have essentially moved up the top-line recovery timeline by one year, with the caveat that improved RevPAR projections are largely due to ADR," said Amanda Hite, STR's president. "ADR has risen more rapidly than we expected-in some cases, that rise was due to strong demand confronting capacity constraints, which enabled solid revenue management, while in other cases, the rise was more influenced by inflation. When adjusted for inflation, RevPAR is further off the pace and will likely remain below 2019 levels until at least 2025. Other than the first quarter of 2021, demand has mostly adhered to the forecast with strong leisure travel, slowly improving group business and an expected progressive increase in international arrivals next year. Of course, these are all national projections of top-line performance. Recovery is not playing out the same across the marketplace, and as noted in our latest monthly P&L release, the cost of labor is adding pressure on the bottom line, which is a contributing factor to many hotels driving rate. Recovery is progressing at a solid rate no doubt, but there will still be plenty of ups and downs along the way."

A STRONGER THAN expected performance by U.S. hotels in the fourth quarter of 2021 led CBRE Hotels Research to upgrade its forecast for the rest of 2022. CBRE now forecasts RevPAR will reach 2019 nominal levels by the third quarter of this year, one year earlier than the previous forecast. Occupancy is expected to rise 6.7 percent to 61.3 percent this year, then rise 5.2 percent to 64.4 percent in 2023. ADR is forecast to rise 10.1 percent to $133.94 in 2022 and go up 6 percent more to $141.99 in 2023. CBRE expects RevPAR to rise 17.5 percent in 2022 overall to $82.04 and then rise 11.5 percent to $91.46 in 2023. Positive trends, such as high employment and the return to the office for many workers who had been working from home contributed to the revised forecast, CBRE said. Other factors contributing to the improvement include below-average supply growth, strong domestic leisure trends, the resumption of inbound international travel and a predicted return to office later this year. However, ongoing inflation and geopolitical tensions connected to the war in Ukraine still threaten progress.

THE FIRST TWO months of 2022 saw up and down performance by Baird/STR Hotel Stock Index, according to STR. In January, the index sank, then in February it rose again, regaining lost ground. In January, the index dropped 3.8 percent after rising 12.7 percent in December. The index still outperformed both the S&P 500, which dropped 5.3 percent that month, and the MSCI US REIT Index, which dropped 7 percent. The hotel brand sub-index fell 4.3 percent from December and the hotel REIT sub-index declined 2.2 percent. "Despite the significant stock market volatility to start the year, both the hotel brands and hotel REITs outperformed their respective benchmarks in January, which continued the momentum from the end of 2021," Michael Bellisario, senior hotel research analyst and director at Baird, said at that time. "Positively, Omicron-related concerns are slowly subsiding, and investors are looking forward again. At the same time, leisure demand remains robust, optimism regarding a more normalized travel environment is building, and the broader growth-to-value rotation has benefitted hotel stocks as inflation pressures remain front and center."

THE UPWARD MOVEMENT of ADR for U.S. hotels lifted the forecast for the market by STR and Tourism Economics. The travel research firms released the new forecast during the opening sessions of the Americas Lodging Investment Summit in Los Angeles on Monday. The recovery timeline laid out in the new forecast remains mostly the same as the previous forecast released in November, with ADR will near full recovery this year. RevPAR is anticipated to exceed 2019 levels in 2023, but when adjusted for inflation ADR and RevPAR are not projected to reach full recovery until after 2025. Occupancy is projected to surpass 2019 levels in 2023. "The industry recaptured 83 percent of pre-pandemic RevPAR levels in 2021, and momentum is expected to pick up after a slow start to this year," said Carter Wilson, STR's senior vice president of consulting. "With so much of that RevPAR recovery being led by leisure-driven ADR, however, it is important to keep an eye on the real versus the nominal. Terms of recovery are not playing out evenly across the board, and many hoteliers have had to raise rates to minimize the bottom-line hit from labor and supply shortages. We are anticipating inflation to remain higher throughout the first half of the year with a gradual leveling off during the third and fourth quarters. If that happens, and we avoid major setbacks with the pandemic, this year will certainly be one to watch with demand and occupancy also shaping up to hit significant levels during the second half."

U.S. HOTEL OCCUPANCY has reached an all-time high in the fourth week of December though the numbers came in lower than the previous week, according to STR. Christmas Day occupancy was 47.2 percent, up from the previous high of 47 percent recorded in 2015. Occupancy was 44.3 percent for the week ended Dec. 25, down from 53.8 percent the week before, and down 8.7 percent when compared to 2019. ADR was $129.67 for the week, up from $121.87 the week before and an increase of 0.5 percent from 2019. RevPAR reached $57.46, down from $65.61 the week before, and dropped 8.3 percent from two years ago. According to STR, a steeper decline during the week from 2019 levels was due to the fact that Christmas fell on a Wednesday two years ago and allowed for an earlier return to non-holiday weekend levels that year. "While Omicron-related closures and service disruptions affected performance in New York City, overall U.S. occupancy was less impacted," STR said.

THE BAIRD/STR Hotel Stock Index rose 12.7 percent in December over the previous month. It was up 25.6 percent for 2021 as a whole. The index outperformed both the S&P 500, up 4.4 percent, and the MSCI US REIT Index, which rose 8.2 percent in December. The hotel brand sub-index increased 13.2 percent from November while the Hotel REIT sub-index rose 10.9 percent. Investment was bolstered by some, if not good, then less bad than expected news regarding the COVID-19 pandemic, said Michael Bellisario, senior hotel research analyst and director at Baird. "Hotel stocks ended a volatile year with strong gains in December as the worst-case scenarios related to the Omicron variant appeared unlikely to unfold as initially feared," Bellisario said. "With the big rebound into year-end, the hotel brands ended up slightly outperforming the S&P 500 in 2021, while the hotel REITs - despite gaining 12 percent on the year - significantly lagged the RMZ's best-ever annual performance. Turning the calendar to 2022, leisure travel strength is expected to persist, but the wildcard for the overall industry's continued recovery remains a more substantialreturn of the business traveler."

ANNUAL CHANGES IN U.S. hotel utility costs and in the Consumer Price Index, or inflation, have historically proven to be strongly correlated. As of August 2022, CBRE is forecasting CPI growth to be 7.7 percent in 2022, followed by another 3.6 percent in 2023. Since inflation has averaged just 2.2 percent since 2000, these inflation projections have hoteliers concerned about operating costs. Given that rising energy costs are a significant driver of the current rise in CPI, hotel managers are especially worried about utility department expenses. Over the past 50 years, utility department expenses have averaged between 3 and 4 percent of total revenue, indicating that hotel managers have been successfully controlling energy costs in the face of fluctuating business volumes. This is particularly commendable given the highly fixed nature of utility expenses. To provide some context to the current challenging environment, we studied recent trends in hotel utility department expenses. The data come from a sample of more than 2,800 U.S. hotels that reported utility department expenses each year from 2015 through 2021 for CBRE's annual "Trends in the Hotel Industry" survey. In 2021 the properties in the sample averaged 209 rooms in size, with an annual occupancy rate of 54.2 percent and an average daily rate of $152.70.

THE OMICRON COVID-19 variant could derail the hotel industry's fledgling recovery if countries like the U.S. move forward to tighten testing policies, according to HotStats. Future hotel bookings, meetings and other hotel-related activity will be impacted by the expectation of travel impediments, whether self-imposed, company-imposed or government-mandated, it added. In the U.S., major indices were still down double digits in October 2021 compared to same month two years ago, according to a blog post by HotStats. "Since a rapid uptick in occupancy from the beginning of the year through the summer, hitting an apex in July, occupancy in the U.S. has since more or less flatlined, a signal that the leisure boom could not be sustained at the same levels prior," said HotStats. "Though much maligned, there is propitious data surfacing in corporate travel. In October, corporate ADR was $7 higher than in October 2019 and $35 higher than in the previous month. Corporate volume mix, defined as the proportion of rooms sold at the corporate rate compared to total rooms sold, has grown 6 percentage points since July."

DEMAND FOR U.S. extended-stay hotels in the fourth quarter of 2021 was more than five times greater than supply, resulting in overall occupancy just below its 2019 peak, according to the Highland Group. December's monthly report from the group also showed the segment to be firmly in recovery. According to the research consulting firm's "U.S. Extended-stay Hotels: Fourth quarter 2021" report, the bottom up recovery continues with economy and mid-price extended-stay hotels in the fourth quarter posting record nominal average rate and RevPAR. Demand in the fourth quarter is at a record high and room revenues are almost 97 percent of their nominal high reached during the same period in 2019, the report said. Occupancy and ADR remain 4 to 5 percentage points off previous high levels but should pick up in the near term as the demand change was six times the corresponding change in supply, it added.

THE 2020 COVID-influenced lodging industry recession resulted in some noticeable changes to the way hotels provide F&B service. Social distancing regulations forced operators to be creative in the way they served food and beverages to guests. Rising wage rates and sharp increases in the cost of food and beverage products compelled hotel managers to find ways to control costs. The inability of hotels to attract employees to fill the positions eliminated during the recession required creative solutions to improve productivity and offer more with less. These factors resulted in the following hotel food and beverage trends during the subsequent recovery period: The increased offering of kiosks and grab-and-go venues The closing of traditional three-meal-a-day restaurants A reduction in the menus, number of seats, and hours of remaining F&B venues Reductions in in-room dining and mini-bar service The conversion of food and beverage space to other revenue generating purposes To learn how these recent changes in hotel food and beverage operations have impacted revenues and expenses, we have analyzed the operating statements of 2,500 U.S. full-service, resort, and convention hotels that participated in CBRE's annual Trends in the Hotel Industry in 2021 and 2022. In 2022, these 2,500 properties averaged 285 rooms in size, and achieved an occupancy of 64.7 percent, along with an ADR of $225.60. To provide more current information, we also relied on the monthly operating statements of 1,200 properties during the period January through June of 2023.

U.S. HOTEL PERFORMANCE moved closer to pre-pandemic levels during the third week of November according to STR. It dipped, however, from the week before. Occupancy was 59.7 percent for the week ending Nov. 20, down from 61.6 percent for the week before and a slight decrease of 2.1 percent from the same period two years ago. ADR for the third week of the month was $126.66, down from $129.98 the week before and increased 1.7 percent when compared to two years ago. RevPAR decreased to $75.60 for the third week of the month from $80.02 the week before, and a slight drop of 0.4 percent for the same period in 2019. Among STR's top 25 markets, Phoenix saw the largest occupancy increase during the week under review, up 6.4 percent to 76.6 percent over 2019. Miami reported the largest ADR increase when compared to 2019, 25.5 percent to $207.72. Oahu Island, Hawaii, experienced the steepest occupancy decline from 2019, down 35.2 percent to 51.8 percent.

ADR GROWTH FOR U.S. extended-stay hotels reached a record high in February, according to hotel investment advisors The Highland Group. Owing to this, the segment saw record high demand and monthly RevPAR up by more than 40 percent during the month compared to a year ago. During the month, occupancy growth was also significant with extended-stay hotel's occupancy premium compared to the overall hotel industry staying well above its long-term average. The 3.1 percent increase in extended-stay room supply in February is the fifth consecutive month of 4 percent or lower supply growth, according to "U.S. Extended-Stay Hotels Bulletin: February 2022" report by Highland Group. It suggested that mid-price and upscale supply increases should be well below pre-pandemic levels during the near term, the report added.

ADR FOR U.S. hotels was the highest in February for any month since August 2021, according to STR. The U.S. hotel industry reported higher performance during the month from the month before. Occupancy was 56.9 percent for February, up from 47.8 percent in January and down 8.2 percent compared to same period in 2019. ADR was $137.39 for the month, increased from $123.51 the prior month and up 6.8 percent from the same month two years ago. RevPAR was $78.24, up from $58.98 in January and down 1.9 percent from two years ago. The February ADR level was roughly 5 percent below the 2019 level when adjusted for inflation, the report said.

SPRING BREAK TRAVEL helped U.S. hotel performance to rise in the third week of March from the week before, according to STR. Occupancy for the week was the highest since the week ending Aug. 7, 2021, and ADR was the second highest on record. Occupancy was 66.9 percent for the week ending March 19, up from 63.2 percent the week before and down 3.7 percent for the same period in 2019. ADR was $151.63 for the week, up from $144.68 the week before and increased 13.6 percent from two years ago. RevPAR was $101.44 for the week, rose from $91.45 the week before and up 9.5 percent from the same period two years ago.

U.S. HOTEL PERFORMANCE was down in the first week of March from the week before, according to STR. However, ADR was up during the week compared to 2019. Occupancy was 61.2 percent for the week ending March 5, down from 62.2 percent the week before and down 8.2 percent for the same period in 2019. ADR was $137.96 for the week, decreased from $143.83 the week before and up 4.7 percent from two years ago. RevPAR was $84.39 for the week, down from $89.45 the week before and down 3.8 percent from the same period two years ago. None of STR's top 25 markets showed an occupancy increase during the period over 2019. Norfolk/Virginia Beach came closest to its 2019 comparable, down just 0.8 percent to 56.3 percent.

U.S. HOTEL PERFORMANCE was up in the second week of March from the week before, according to STR. ADR was up during the week compared to two years ago. Occupancy was 63.2 percent for the week ending March 12, up from 61.2 percent the week before and down 9.8 percent for the same period in 2019. ADR was $144.68 for the week, increased from $137.96 the week before and up7.7 percent from two years ago. RevPAR was $91.45 for the week, up from $84.39 the week before and down 2.8 percent from the same period two years ago. None of STR's top 25 markets showed an occupancy increase during the period when compared to two years ago. Miami came closest to its 2019 comparable, down 4.7 percent to 84.1 percent.

MEMORIAL DAY WEEKEND is back and almost as strong as pre-pandemic levels, with 39.2 million people forecast to travel 50 miles or more from home during the holiday period, according to AAA Travel. Despite record high gas prices, a majority of travelers, 34.9 million, are expected to drive, but air travel also is seeing resurgence. The total forecasted number of travelers is 8.3 percent higher than 2021's 36.2 million and comes closer to 2017 levels. Last year, U.S. hotels saw occupancy hit nearly 62 percent over that Memorial Day weekend, according to STR. "Memorial Day is always a good predictor of what's to come for summer travel," said Paula Twidale, senior vice president, AAA Travel. "Based on our projections, summer travel isn't just heating up, it will be on fire. People are overdue for a vacation and they are looking to catch up on some much-needed R&R in the coming months."