Though a lot of industries got hammered in the course of the pandemic, hotels took a notably serious beating, so much so that 2020 was officially their worst year on record. Last year, hotel occupancy dropped by an average of 41,6%, according to CBRE. And revenue per room declined 55.5% compared to 2019's numbers.
In fact, it's expected that U.S. hotels won't recover fully from the pandemic until 2025. Ouch. But while the industry itself may have a long road ahead of it, some hotels are likely to bounce back faster than others.
Leisure travel is making a comeback
Now that many U.S. adults, and a large number of older children, have received a coronavirus vaccine, there could be a surge in leisure travel, especially once schools wrap up for the semester and summer kicks into full gear. As such, resort hotels in prime destinations are likely to see rising occupancy rates in the near term.
Hotels in and near beach resort areas could see a surge in bookings this summer, as could those that offer access to popular theme parks, like Disney World. And hotels in close proximity to national parks could also enjoy an uptick in bookings as Americans uphold the trend of spending more time outdoors.
Furthermore, a lot of cities are opening up and lifting quarantine restrictions in light of progress on the coronavirus front. As such, hotels in major metro areas could end up welcoming more guests this summer.
Finally, a lot of Americans have taken to road-tripping during the pandemic. Hotels along major interstates could enjoy decent occupancy rates as travelers hit the highway.
But business travel could stall for a while
On the other hand, hotels that cater primarily to business travel may not see the same surge in bookings as those that are more leisure-oriented. At this point, many employers are making plans to shift employees away from remote work and bring them back to the office in some capacity. But until those plans are solidified, it's unlikely employers will be too eager to send their staff members away on business trips. As such, hotels whose amenities center largely on conference and meeting rooms could remain pretty empty throughout the summer.
Hotels that are adjacent to convention centers and rely on those events for bookings are also likely to remain sluggish for a while. Though some event organizers are starting to put conferences together, it's doubtful they'll return to pre-pandemic levels anytime soon, leaving nearby hotels to continue grappling with vacancies.
All told, the hotel industry as a whole still has a ways to go before it can declare victory over the pandemic, and so hospitality real estate investment trust (REIT) investors may need to suffer through a few more precarious quarters until hotel revenue hits pre-pandemic levels. But in time, the industry should manage to stage a robust recovery, and that's something investors should keep in the back of their minds coming off of a dreadful 2020.