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U.S. HOTELS FORECAST that their properties will exceed 2022 budgeting targets as the hospitality industry returns to normal, according to a survey by the Hospitality Asset Managers Association. The HAMA survey found a renewed sense of optimism among members. The Fall 2022 Industry Outlook survey revealed that around 60 percent of respondents believe most of their portfolios, more than 75 percent, will exceed 2022 budgeted RevPAR. Nearly half of participants expect 75-100 percent of their properties to exceed 2022 budgeted GOP, the survey said. Around 60 percent of full-service and above said that they expect to exceed 2022 budgeted GOP and just over 40 percent of select-service and below hotels forecasted to exceed 2022 budgeted GOP.

THE U.S. HOTEL construction pipeline continued its growth at the end of the second quarter of 2022 as travel returned, according to Lodging Econometrics. The upscale and upper-midscale segments continue to lead the pipeline with 68 percent of projects. The total U.S. construction pipeline stands at 5,220 projects with 621,268 rooms during the second quarter. That is up 9 percent by projects and 4 percent by rooms, over the same period last year, according to the U.S. Construction Pipeline Trend Report from LE. There were 965 projects with 130,914 rooms currently under construction in the second quarter, down 17 percent by projects and 18 percent by rooms, year-over-year. As many as 2,009 projects with 232,163 rooms are scheduled to start in the next 12 months, up 9 percent by projects and 9 percent by rooms, over last year. According to the report, projects and rooms in early planning reached a record high at 2,246 projects with 258,191 rooms, up 26 percent by projects and 15 percent by rooms, compared to last year. "Improved demand and increased consumer sentiment and spending has led to record-high rates of travel and much improved hotel revenue over the last few months. The outlook for the industry is positive and growth is expected to continue throughout 2022, albeit at a decelerated pace than initially expected. The industry's ability to adapt to the constantly changing economic environment provides a positive outlook for hotel performance, and its eventual full recovery," the report said.

REVPAR FOR U.S. hotels recovered to 83.2 percent of 2019 levels in 2021, according to STR. Also, in December 2021, ADR and RevPAR hit all-time highs. U.S. hotel occupancy in 2021 was 57.6 percent, down 12.6 percent when compared to 2019. ADR for the year was $124.67, down just 4.8 percent from 2019. RevPAR at $71.87, down 16.8 percent when compared to two years ago. "In addition to 2020, U.S. hotel occupancy failed to reach 60 percent for just the second time since 2011," STR said. "On a nominal basis, 2021 ADR was the fourth highest on record. The country's RevPAR level was its second lowest in eight years behind only 2020." According to the report, none of the top 25 markets experienced an occupancy increase last year over 2019. Tampa reported the highest occupancy at 68.4 percent, down 5.2 percent from 2019. The largest ADR increase in 2021 was in Miami, up 14.7 percent to $223.49, compared to 2019. Norfolk/Virginia Beach registered the highest growth in RevPAR, up 7.7 percent to $72.31.

DESPITE PROJECTIONS OF persistent inflation and a moderate economic recession, CBRE's November 2022 Hotel Horizons forecast calls for a 5.8 percent increase in RevPAR in 2023. This is up from CBRE's previous forecast of a 5.6 percent increase in RevPAR for 2023. Propelling CBRE's increased outlook for RevPAR is an expected 4.2 percent rise in ADR, driven in part by the continuation of above long-run average inflation. For 2023, CBRE is forecasting the Consumer Price Index in the U.S. to increase by 3.5 percent year over year. Inflation continues to have a mixed impact on the hotel industry, bolstering top-line growth while pressuring margins. Supply and Demand Inflation is also impacting development activity. The combination of rising construction material costs, a tight labor market, and high interest rates will serve to keep supply growth over the next five years 40 percent lower than historical trends. Instead of construction, we expect cash flows in the near term to be focused on debt reductions, renovations and remodels given the backlog of Capex that built up during the pandemic. Given its forecast for a 0.2 percent decline in 2023 gross domestic product, CBRE lowered its expectations for demand growth from 3.3 percent in their August 2022 forecasts to 2.9 percent in the November update. With the projected supply increase remaining at 1.2 percent for 2023, the net result is a reduction in CBRE's occupancy growth estimate for the year to 1.6 percent, down from the 2 percent increase previously forecast. The lowering of occupancy expectations will somewhat offset the enhanced outlook for ADR growth.

THE BAIRD/STR HOTEL Stock Index jumped in July, ending a downward trend for two consecutive months. The index decreased 10.4 percent year-to-date for the first seven months of 2022. Baird/STR Index recorded a sharp increase of 14.3 percent in July, according to STR. The index fell 19.3 percent in June and dropped 5.8 percent in May. It went up 0.7 percent during April. It increased 2.2 percent in March after rising 4.1 percent in February. The Baird/STR Index surpassed both the S&P 500, up 9.1 percent from June, and the MSCI US REIT Index, increased 8.7 percent, respectively during July. The hotel brand sub-index rose 14.2 percent from June, while the Hotel REIT sub-index increased 14.6 percent during the month. "Hotel stocks rebounded sharply and outperformed their respective benchmarks in July; relative outperformance has continued in August," said Michael Bellisario, senior hotel research analyst and director at Baird. "Despite the big gains in July, hotel stocks did not fully recapture June's losses. Positively, second quarter earnings exceeded analysts' and investors' expectations, and broader recession fears have begun to subside, which has boosted sentiment and stock prices. All eyes are on the post-Labor Day outlook that should reflect a more normalized travel environment."

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."