U.S. hotel demand might not fully recover until 2023

U.S. hotel demand likely won’t see a full recovery until 2023, according to a new forecast from travel data company STR and consultant Tourism Economics.

The two firms said Thursday they expect average hotel occupancy of 40 percent this year, slowly climbing to 52 percent in 2021. That’s down from a healthy 66 percent in 2019.

U.S. hotels have been busier this summer in beach locations such as Norfolk, Va., where occupancy stood at 67 percent last week, STR said. Big cities and Hawaii have been slower to recover. Hotel occupancy in Oahu, Hawaii, stood at 20 percent last week, STR said.

But even as leisure demand rises, hotels are sorely missing business travel and group events such as conferences and weddings.

The coronavirus will weigh heavily on travel through at least the first quarter of 2021, said Adam Sacks, the president of Tourism Economics. He expects a cautious recovery in the first half of next year, with stronger growth in travel the second half.

Eric Rosengren, president of the Federal Reserve Bank of Boston, said the U.S. recovery has likely been prolonged by states in the South and West that reopened businesses and beaches — and then had to close them — before the virus was under control.

In Galveston, hotel occupancy hit 64 percent at the end of May before dropping to 48 percent at the end of July. Occupancy rates have been climbing again.

Hotel revenue will take even longer to recover, returning to normal levels in 2024, Tourism Economics and STR said. Travelers want deals, and midrange hotels are recovering more quickly than luxury brands.

“People are going to expect a bargain for everything,” Hilton President and CEO Christopher Nassetta said last week. Hilton and Marriott both reported plunging revenue in the second quarter.

Revenue per available room — a key hotel metric — will fall to $41.31 this year, down from $86.64 in 2019, STR and Tourism Economics said.