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Hotel Industry Updates

A Glass-Is-Half-Full Look at the Hotel Industry

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Luxury hotels conservatively need occupancy rates 1.5 times greater than economy hotels.

The earliest that U.S. hotels could return to pre-COVID-19 revenues might be 2022, according to a report from management consulting firm McKinsey & Company. That’s a glass-is-half-full outlook, which states that revenue per available hotel room could be up 2 percent.

But in a glass-is-half-empty outlook, McKinsey & Company said revenue per available hotel room might not return until 2023 and could still be down 20% in 2022 when compared to the pre-COVID-19 economy.

McKinsey & Company said revenue per available hotel room is expected to fall by 53% in 2020.

Many U.S. hotels are closed, especially luxury hotels. In early May, occupancy was less than 15% for luxury hotels and around 40% for economy, according to McKinsey & Company.

“Looking ahead, we expect economy hotels to have the fastest return to pre-pandemic levels, and luxury and upper upscale hotels to have the slowest,” the consultant stated in its report. “That’s in part because economy hotels are better able to tap segments of demand that remain relatively healthy despite travel restrictions, including truck drivers and extended-stay guests.”

McKinsey & Company said its analysis indicates that to cover variable and semi-fixed costs, luxury hotels conservatively need occupancy rates 1.5 times greater than economy hotels.

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