Outlook for the Hotel Industry - The impact of current events on hotel performance and values - HVS
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Outlook for the Hotel Industry The impact of current events on hotel performance and values January 2021
Outlook for the U.S. Lodging Industry
The following forecasts for the U.S. lodging industry reflect the current outlook of market participants.
Approximately 35% of the RevPAR decline is expected to be recovered by the end of 2021 (and 32% in
2022), with full RevPAR recovery by 2024.
Historical Forecast
2018 2019 2020 2021 2022 2023 2024
Occupancy 66.1% 66.1% 42.0% 53.5% 61.0% 65.0% 65.5%
Percent Change 0.0% -36% 27% 14% 7% 1%
Average Rate $129.97 $131.17 $103.00 $109.25 $119.00 $127.25 $133.75
Percent Change 0.9% -21% 6% 9% 7% 5%
RevPAR $85.96 $86.76 $43.26 $58.45 $72.59 $82.71 $87.61
Percent Change 0.9% -50% 35% 24% 14% 6%
This represents the current expectation for the timing and pattern of recovery, with occupancy anticipated
to recover first, followed by ADR. All forecasts are in current dollars.
Source: STR (Historical Years) and HVS (Forecast)
2If 60% Want The Vaccine, and States Can Administer
2.9 Million Doses Per Day at Peak
Total Possible Vaccinations 60% of Population Vaccinations Scenario of Vaccinations Administered
700,000,000
600,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
0
6-Apr
15-Jun
5-Jan
2-Feb
9-Feb
2-Mar
9-Mar
4-May
22-Dec
29-Dec
16-Feb
23-Feb
16-Mar
13-Apr
20-Apr
27-Apr
23-Mar
30-Mar
11-May
18-May
25-May
1-Jun
8-Jun
12-Jan
19-Jan
26-Jan
Source: HVS
3Hotel Occupancy
2020 & 2021 2019
80%
60%
40%
20% -17.1%
0% Our 2021 outlook reflects an
average occupancy level of
J F M A M J J A S O N D J F M A M J J A S O N D
Month of the Year
53.5% (vs. 42% in 2020) and
Hotel ADR
2020 & 2021 2019 6% ADR growth, averaging
$150 roughly $109 (vs. $103 in
$130 2020).
$110
Source: STR (Historical Years) and
$90
HVS (Forecast)
$70
-21.5%
$50
J F M A M J J A S O N D J F M A M J J A S O N D
4 Month of the YearOccupancy
Economy -8.2%
Midscale -15.1%
Upper Midscale -23.5%
Upscale -31.2%
Upper Upscale -52.2%
Impact differs
significantly
Luxury -52.4%
RevPAR ADR
among the
hotel classes
-18.9%
Economy
-11.7%
-25.8%
Midscale
-12.6%
-36.2% Data Source: STR
Upper Midscale
-16.6% *Running 28 Days Ending
January 9, 2021
-45.7%
Upscale
-21.0%
-61.3%
Upper Upscale
-19.1%
-56.6%
Luxury
5 -8.9%What About the Transaction Market?
Historical Hotel Transactions
PPP funding and relaxed
Transactions Dollar Volume (M) forbearance rules –
$35,000 700 keeping wave of
$30,000 600
foreclosures from
Dollar Volume (Millions)
Number of Transactions
materializing
$25,000 500
For Transactions to Occur:
$20,000 400
Sellers ability to accept
$15,000 300 significant discount from
$10,000 200 Pre-COVID values
(often 20–35%)
$5,000 100
Buyers ability to obtain
$0 0
financing
2010 Q3
2016 Q1
2007 Q1
2007 Q3
2008 Q1
2008 Q3
2009 Q1
2009 Q3
2010 Q1
2011 Q1
2011 Q3
2012 Q1
2012 Q3
2013 Q1
2013 Q3
2014 Q1
2014 Q3
2015 Q1
2015 Q3
2016 Q3
2017 Q1
2017 Q3
2018 Q1
2018 Q3
2019 Q1
2019 Q3
2020 Q1
2020 Q3
Hotel performance
showing that the worst is
behind them
Source: Real Capital Analytics
6The Worst is Behind Us
Select markets realized an
25 uptick in 2020 RevPAR,
leading to a positive value
20 story.
Declines predominantly in
15 the -10% to -35% range
Number of Hotels
last half of 2020; these
10 declines will diminish as
the year progresses and
5 recovery sets in.
0
Smaller deals can take
-60% -55% -50% -45% -40% -35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% advantage of the SBA 7a
to - to - to - to - to - to - to - to - to - to - to - to - to - to to to to to to loan, with limited
65% 59% 54% 49% 44% 39% 34% 29% 24% 19% 14% 9% 4% 9% 14% 19% 24% 29% 34%
mortgage payments for 6
months and a government
guarantee.
Source: HVS
7Robust occupancy recovery should set in during the summer and fall of 2021,
concurrent with the majority roll-out of the vaccines behind us.
Final Thoughts ADR recovery will lag the occupancy recovery, with full RevPAR recovery expected
by 2024.
Transaction volume is anticipated to pick up when lending opens up more widely, a
recovery in NOI is documented, and price declines diminish.
Meetings business is expected to return with strength. Zoom fatigue has set in, and
people are ready and excited to meet again in person.
High and continually increasing construction costs will keep new supply in check
through the near term.
Numerous potential investors will create competition for deals, which is
anticipated to fuel transaction activity and mitigate value declines.
8PLANNING
Superior Results Through Unrivaled Hospitality Intelligence.
Everywhere.
Site Selection
Market Study FR
Investment Search
Product Recommendation
HVS has been supporting the hospitality industry in Financial Projections
the U.S. and around the world for over 40 years. Our Financial Feasibility Analysis
senior staff represents a collective 300+ years of Economic Impact Analysis ACQUISITION &
experience advising our industry, including through Architectural Concept Design DEVELOPMENT
multiple prior cycles and events. DISPOSITION Construction Costs Estimates
Valuation & Pricing Guidance
Exit Strategy Appraisal for Financing
Our expertise covers the full range of hospitality Brokerage & Advisory Debt & Equity Financing
assets and spans the full lifecycle of a hotel, including Adaptive Reuse Analysis Due Diligence Coordination
services that support developers, owners, operators, Shared Ownership Analysis Brand Selection & Contract
Negotiations
lenders, and investors. With 40+ offices in markets >
Pricing Analysis
Operator Selection & Contract
across the U.S., we offer local insights on a real-time Negotiations
basis. Interior Design & Project
Management
Executive Search
This knowledge and experience is available to OWNERSHIP & OPERATION
Pre-Opening Oversight
support you as you navigate these challenging times. Asset Management
Our platform is fully functional on a remote basis, so Management Agreement Analysis
even though we are not currently traveling, our staff & Negotiation
Hotel Management
can access the full resources of HVS on your behalf. Appraisal for Refinancing
Operation Performance Analysis
Let us know how we can assist you. Repositioning Study & Valuation
Repositioning Design &
Rod Clough, MAI Budgeting
rclough@hvs.com | +1 (214) 629-1136 Timeshare Conversion Review
Capital Improvement Financing
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