Hotel room rates are recovering strongly due to pent-up tourism demand and high inflation, bringing bright prospects for investors.
According to the US Pew Research Center, when the Covid pandemic first hit in early 2020, more than 142 countries had implemented full or partial border closures, with 91% of the world's population subject to travel restrictions as of March 2020.
But now, as tourism returns more quickly than expected after vaccinations are ramped up in high-income countries, hotels around the world are unable to keep up with pent-up demand amid a labor shortage, pushing room rates up dramatically. In May 2022, flights globally hit their highest level for the first time since the pandemic took hold in 2019.
According to research by UK platform Pay Now Pay Later and travel firm Butter, demand for hotel rooms in several popular destinations increased by 184% between October 2020 and October 2021. In New York, demand increased by 361%, pushing room rates up 28%. . Meanwhile, in Europe, Rome and Lisbon saw room rate increases of 23% and 20% respectively.
Hilton Hotels Group CEO Chris Nassetta predicts that the hotel chain will "have the biggest summer ever in its 103-year history."
Lim Hui Ting, co-founder of luxury travel agency UniqLuxe, said many hotels are still unable to open at full capacity due to having used the lockdown time to renovate or due to labor shortages when the job quitting rate is high during the pandemic.
These reasons together with inflationary pressure have led many hotel groups to forecast that room rates will continue to increase.
“The price of everything like gas or goods has gone up, so hotel room rates will also go up. The business has spent 2 years not organizing entertainment activities and business events. They have a budget in place during the pandemic to meet this need,” said Mr. Nassetta.
Marriott CEO Tony Capuano said that over Memorial Day weekend in the US, the group's revenue per room was up about 25% from 2019. Room rates for the first quarter of 2022 at luxury hotels such as the JW Marriott, Ritz-Carlton and St. Regis are up 30% from pre-pandemic levels. Resort and coastal destinations have strong upside potential, but urban areas will need a longer recovery period.
Keith Barr, CEO of the InterContinental hotel group, which owns brands such as InterContinental and Holiday Inn, expect demand for hotel rooms to continue to grow for the rest of the year as tourism is more normalized post-pandemic. That will likely be accompanied by further price increases as inflation and other costs are added to the room rate.
In Asia, Vietnam, the hotel market is also recovering rapidly as international tourism fully reopens on March 15, 2022, fueled by strong domestic demand. Hotel room rates on the occasion of the Hung Kings Anniversary and April 30 - May 1 increased by 20-30% with occupancy skyrocketing to 80-90% in many famous destinations. The recovery of the tourism industry and room rates has also brought a lot of joy to hotel property investors, who have struggled to survive during the past two years of the pandemic.
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