CBRE Updates 2020 Hotel Outlook

Y-o-Y Change in U.S. RevPAR during the COVID-19 Pandemic (CBRE Hotels, STR, March 2020).

CBRE has updated its 2020 Hotel Outlook amidst the Covid-19 pandemic. While outbreaks of several forms of transmissible viruses such as SARS, Ebola, and H1N1 (Swine Flu) took a large human toll, they were not as impactful on the paid accommodation industry as the COVID-19 virus.

CBRE expects GDP growth will slow to 0.4 percent in 2020, down from our previous estimate of 1.9 percent. The COVID-19 outbreak will cause a sharp drop in economic activity in Q2. As early as Q3 2020, activity will begin to stabilize and a recovery is expected to be underway by Q4.

Key Findings:

  • CBRE expects GDP growth will slow to 0.4% in 2020.
  • U.S. RevPAR will decline by 37% in 2020, with a contraction of more than 60% in Q2.
  • Demand will decline by 28% in 2020; ADRs are expected to decline 11% in 2020.
  • The most complex constraint impairing travel comes from social distancing efforts and travel or group gathering restrictions on global populations.
  • Properties that primarily cater to discretionary travel will be affected most, i.e. luxury, upper upscale, urban, airport, and resort properties.

According to the report, the expected declines in RevPAR will be worse than experienced in the 2001 and 2009 economic downturns combined. However, given the expected quick rebound in economic growth and historic resiliency of travel demand, CBRE forecasts a strong hotel revenue recovery in 2020 and 2021 and that RevPAR could recover to pre-recession levels by 2022.

CBRE is not predicting that occupancy levels will get as low as those realized in China, given the unproven ability of the United States to enforce travel restrictions and inconsistent policies at the city and state level. There is also a significant base of essential hotel demand. This includes short and long-term housing, construction, airline, and contract workers, stays related to the healthcare industry (workers, patients, and their families), students, people self-quarantining away from their family, etc..

Read the full report here



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