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U.S. Lodging Industry Overview

Elaine Sahlins • 9/6/2022

The first six months of 2022 have shown the resilience of the U.S. hotel market as a whole but display nuanced performance on regional and local levels. Compared to the first half of 2021, U.S. demand increased over 18%, representing almost 100 million more occupied rooms, while the average room rate improved by 14.8%. Because of the higher room rates, even with the lower volume of occupied rooms compared to pre-pandemic levels, national revenue per available room (RevPAR) is at a record high, exceeding the number seen in mid-year 2019, as shown in the chart below.


Hotel Supply, Surging for Years, Is Slowing 

Starting with a long-range perspective, between January 2010 and June 2022, the number of hotel rooms in the U.S. increased approximately 18%. On an annual basis between 2010 and 2018, demand growth exceeded this increased supply, resulting in an improving national occupancy that increased from 57.5% to 66.1%. Demand growth was still positive in 2019 at 1.6%, but the number of new rooms that year could not be fully absorbed, and occupancy declined. By the end of 2019, industry participants were already anticipating market performance to decrease in 2020 and 2021 with more modest increases in supply. The closure of rooms from the pandemic has helped to moderate the impact of new supply during the recovery, as the number of available rooms open in the first half of 2022 is only a 1.2% increase from the first half of 2019. STR reports that the number of rooms under construction in the current cycle peaked in April 2020 at 200,200. The current count as of June 2022 is 149,000.  

With higher interest rates and construction costs in 2022, several projects in both urban and suburban markets are either being cancelled or postponed. Interest remained in leisure-driven markets, where new projects continued. These destinations are often in locations with high barriers-to-entry, which can constrain development. Overall supply growth is anticipated to continue to subside. 

Hotel Demand, Affected by the Pandemic, Has Seen a Staggered Recovery 

The use of hotel rooms has shifted dramatically since the onset of the pandemic and trends continue to evolve. As has been well-documented, in the initial months of the pandemic many hotels closed or were occupied by first responders, healthcare workers and contract crews. Local guests seeking a respite from being stuck at home provided the bulk of demand for many months in 2020. As travel confidence grew, concurrent with closed workplaces and school facilities, lodging in drive-to destinations benefitted. With the roll-out of vaccines in the spring of 2021, domestic travelers were unleashed. Despite subsequent variants impacting some months in 2021 and 2022, operators in leisure-driven markets confidently and steadily increased rates. While the higher hotel rooms rates have not subsided, some operators are reporting that demand in domestic destination hotel markets has started to temper. This is due to reduced consumer spending in the second quarter and an increase in outbound international travel—particularly since vaccine requirements to return to the U.S. have been lifted.  

Group Demand Still Growing 

The other major demand segments—group and business travel—are still in the nascent stages of recovery. Group demand, which was shunned by individuals and corporations in 2020 and 2021 due to social distancing requirements, has been steadily recovering. STR/CoStar reports that group demand, particularly in the luxury and upper upscale hotels, has been equivalent to 2019 levels for a few months in 2022 with group average daily rates (ADR) exceeding historical levels.  

Group demand is partially driven by pent-up social events and weddings but is also perceived as an antidote for work-from-home isolation. Single- and multi-day business events are increasingly seen as a means of efficiently bringing together employees, vendors and clients. As regulations and sentiment about environmental sustainability intensifies, attending a convention or group event that can encompass many business activities is viewed as more effective and as a better use of resources than multiple trips by multiple individuals.  

Conventions and Trade Show Attendance Still Constrained 

Conventions and trade shows are also recovering. The in-person functions of product commerce and deal-making are viewed as more effective in person than online. However, even though more dates are being secured at convention centers across the country, attendance remains constrained. The Center for Exhibition Industry Research (CEIR) reports that the U.S. business-to-business (B2B) exhibitions industry improved significantly in the first quarter of 2022 from the previous eight quarters. As most trade shows are held in the first quarter, the impact is positive at mid-year. That said, overall exhibition performance remains below pre-pandemic levels, registering a decline of 37.9% compared to 2019. Industry professionals attribute the lack of international travel as a significant factor in this segment. 

Individual Business Travel Uncertain 

Individual business travel remains the most critical element for a long-term recovery of lodging performance. Industry expectations for the return of individual business travel remain uncertain and are tied to return-to-office activity, travel budgets, corporate requirements for sustainability, and personal willingness to travel, among other factors. The institutionalization of online meetings is an ongoing replacement for some percentage of previous in-person trips. 

Deloitte’s recently released survey of corporate travel managers reports an expectation that U.S. corporate travel will reach 68% of 2019 levels by the end of 2022. This is a more optimistic perspective than Bill Gates’ announcement in November 2020 that 50% of business travel had been permanently erased. It is still a question if or when there will be a full return of road warriors and occasional business travelers to 2019 levels. 

Benefits of Business Travelers 

Less frequent use of hotels by business travelers is material to overall performance. Steady, mid-week business travel provides the compression to support higher average rates. Business travelers and corporate groups are also supportive of the operation of non-lodging amenities in full-service hotels, particularly food and beverage. Average rates have improved with the strong leisure demand since the onset of the pandemic. But moving into third quarter, as vacation periods give way to schools reopening, the ability to sustain these rates without business travelers is problematic for many hotels and markets, particularly in urban cores. 

Improved International Travel 

Inbound international travel has improved since the U.S. eased restrictions in November 2021 and lifted the vaccination requirements in June 2022. However, international travel is still well below 2019 levels. The U.S. Travel Association reports that international inbound travel spending in 2021 was 78% below 2019. The Airlines for America trade association reports that in June 2022 outbound U.S. international travel was 19% below 2019 levels while inbound travel was 33% below. With the war in Ukraine, higher airfares, the current parity of the U.S. dollar and the euro, and constraints on travel from China, this important component of the U.S. lodging market remains impacted. Recovery of this segment may take several more years. 

Top 25 Markets 

The top 25 markets, as defined by CoStar, continue to show varied performance, illustrating the post-pandemic surge of leisure demand and contraction of business travel. The following compares the performance for these markets between 2019 and the twelve months ending 2022 ranked from largest to smallest percentage change. 



Only eight of the 25 markets have RevPAR that is at or above 2019 levels. These markets, which include major destinations in Florida, Arizona and California, were established leisure locations and have thrived in recent years. The RevPARs for markets that were more heavily dependent on business and convention travel—including Minneapolis, Boston and Chicago—are still 20% or more below 2019 levels. Areas that have highly specialized economic bases such as tech in San Francisco and Seattle, or politics in Washington DC, continue to suffer. The lack of overseas inbound hotel use is apparent in coastal markets and for Oahu, which has yet to see a full return of Japanese tourists. While the national statistics are trending positively, the results of individual markets are highly disparate.  

Other Impacts on Lodging Performance 

As with other sectors of the economy, the lodging industry is constrained by several complex impacts: 

  • Labor issues remain pressing. CoStar reports, from Bureau of Labor Statistics data, that the hotel industry is still down 300,000 workers when compared to February 2020. The lack of employees means a more competitive environment with higher payroll costs. Many hotels are offering fewer services with more modest or no housekeeping for stay-overs. Some hotels are unable to offer a full room inventory for rent due to staffing limitations. Industry discussion touts the increased use of technology to streamline operations; however, the implementations to date have been relatively limited. The use of robots for delivery, vacuuming and cocktail-making are expanding, and while self-check-in and door opening using phone apps are being adopted, hotels remain labor-intensive businesses.  

  • The increasing inflation rate is a double-edged sword. Higher travel costs, particularly for airfare, and less discretionary income for travelers, have curtailed some plans while providing an acceptance of increasing room rates and food and beverage pricing. Higher costs are concurrently eroding profits. The impact on summer travel spending and profitability remains to be seen. 

  • Increasing gas prices are also expected to impact summer travel plans although the actual effect is still in progress. The expectations are more anecdotal at this point and are intertwined with the overall effect of inflation on spending. 

  • The disruption of the supply chain is also intermingled with inflationary pressures. The sourcing of hotel supplies is still a daily trial for hotel operators, although reportedly easing somewhat. The availability and cost of food products and guest amenities adds to the challenge of providing a consistent experience while costs are increasing. 

  • The recent economic contraction has elicited fears of recession without a consensus about the near-term outlook as economists and business leaders proffer different expectations. Hindsight alone may provide the answer. 

Hotel Transaction Overview 

Since the start of the pandemic, distressed hotel sales have not materialized even though they are highly sought-after by investors. Hotel transactions, however, had been gaining traction since the beginning of 2021 until volume began to slow in the second quarter of 2022. The trends since the Global Financial Crisis are shown below. 


As would be expected, hotel transactions were muted in 2020. With substantial capital amassed for hotel transactions after the onset of the pandemic, activity surged in 2021 with highly competitive bidding for properties. While distressed sales were not offered, investors pursued other hotel investment opportunities with the expectation of upside during the recovery and value-add from renovations.  

A few large single assets transacted in the first half of 2022 included Sheraton Boston, La Quinta Resort in California, Naples Grand Beach Resort in Florida and the Confidante Miami Beach. These four sales accounted for approximately 10% of full-service hotels sales volume. The $1.445 billion purchase of Woodspring Hotels by Blackstone from Brookfield represented over 11% of the limited-service hotel volume. Summit Hotels and GIC’s acquisition of 27 hotels from NewcrestImage for $766.5 million represented another large portfolio sale. 

The anticipated and then actual increase in interest rates resulted in a slowing of transactions in recent months. This along with the uncertainty of recovery timing, particularly for business travel, resulted in higher capitalization rates, the repricing of assets, and a reduction in the number of deals.  

In general, hotel properties are expected to continue to be a highly desirable asset class and near record “dry powder” funding from private equity and debt funds, and overseas investors continue to seek opportunities, but lack consensus about pricing and capitalization rates. Specific market recovery expectations and the lack of capital projects and PIP refurbishments in recent years are challenges that override the lack of alternative investments in the search for yield. In addition, investment theses are increasingly supported by higher construction costs which can translate into attractive pricing relative to replacement cost and by a diminishing supply pipeline. 

Investor Profile 

The larger property sales at the beginning of 2022 attracted more institutional equity although private equity was extremely active, not just with acquisitions but with recapitalizations and debt. REITs continued to be more active sellers than buyers in the current market. 

Many transactions since the pandemic have been quiet, off-market financial deals not necessarily direct purchases but resulting in the control of an asset. Deal flow has slowed in recent months. In addition to interest rate increases, the potential of a recession is top of mind. Business travel is elusive, but investors are optimistic that long-term value exists in the hotel industry.  

Conclusions and Outlook 

The hotel industry remains adaptive. Since March 2020, global, national and local shifts in business and social trends have disrupted travel but the hotel industry remains reactive and adaptive. Some initial impacts from the pandemic have been reconciled though vaccinations and the loosening of mask mandates, and travel remains an American love. However, changes in personal and business behavior, particularly the adoption of work-from-home and the routine use of online communications technology, have directly impacted the performance of hotels.  

Nationally, the lodging market is trending upward; locally, it varies. On a national level, the U.S. lodging market recovery is well into the upside of the cycle, but the performance of individual markets is quite diverse, depending on the source of hotel demand. Industry participants are beginning to contemplate whether some markets may be experiencing a reset in hotel room performance both for those markets that have seen record-setting rates and for markets which have not yet seen business and group travel return. The prospect of long-term change in business travel patterns could result in a lower performance level for suburban and urban markets dependent on commercial and group travel. At the same time, leisure markets that have benefitted from drive-to activity may see more year-round demand. 

Uncertainty continues but optimism remains. Apprehension remains as any national or global influence—such as a potential economic recession, continued high inflation and gas prices, as well as a challenging employment picture—can all shift a market’s performance quickly. Recent Supreme Court decisions and the mid-term election in November are also adding to the general anxiety of the moment. The complexities of the current economic, geo-political situation and remaining public health concerns will still need to play out for any clarity to emerge. Potential external risks and inflationary trends continued to challenge the performance gains of 2021 and early 2022, but with stronger performance beginning in the second quarter, industry participants remain optimistic about the long-term trajectory. 



Whether you own or invest in a full-service hotel, a riverboat casino or a conference center, Cushman & Wakefield’s Hospitality & Gaming practice group offers a full range of valuation and advisory services to help you uncover what’s next for your properties.


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