According to the American Hotel & Lodging Association’s 2023 State of the Hotel Industry Report, the hotel industry is expected to surpass pre-pandemic levels of demand, nominal room revenue and state and local tax revenue this year, while creeping closer to other key 2019 performance metrics.
The report forecasts that operational challenges such as staffing shortages and economic factors will replace COVID as hoteliers’ top concerns. It was created in collaboration with STR, Avendra, Ecolab, Encore, and Oracle and is based on data and analysis from Oxford Economics.
It’s not all good news, as hoteliers can anticipate further price increases and supply-chain disruptions. Avendra reported that market forces will continue to influence the pricing and availability of the products that hotels rely on to operate. While broad inflation, as measured by the consumer price index (CPI), has slowed from summer highs, inflation for hospitality-related products is expected to remain in the 5% to 10% range for the next few quarters, which is more than double the historical average.
The following are the report’s key findings:
- Nominal room revenue is expected to reach new highs in 2023 ($197.48 billion versus $170.35 billion in 2019). While these figures have not been adjusted for inflation, and real revenue recovery will most likely take several years, the trendlines are encouraging.
- Room-night demand is expected to exceed pre-pandemic levels by 2023. (1.3 billion occupied room nights vs. 1.29 billion in 2019).
- State and local tax revenue from hotels is expected to increase to $46.71 billion in 2023, up from $41.11 billion in 2019.
- In 2023, average hotel occupancy is expected to be 63.8%, just below 2019’s 65.9%.
- Staffing is expected to remain a significant challenge for hotels in the United States in 2023, with hotels employing 2.09 million people in 2023, down from 2.35 million in 2019.
- According to AHLA Platinum Partner Avendra, inflation for a variety of hospitality-related products will remain between 5% and 10% over the next few quarters.
- The future of group business is bright: According to AHLA Platinum Partner Encore, 70% of planners polled for the company’s Fall 2022 Planner Pulse Report were either booking or actively sourcing new events, with 61% expecting larger budgets in 2023.
Other forecast aspects include guests prioritizing cleanliness, price, flexibility, and sustainability over pandemic-era precautions; meetings and events returning stronger with larger budgets; technological advancements propelling the industry forward, with new possibilities for AI and robotics in the industry and closer attention to issues such as sustainability, cybersecurity, and privacy; and the ancillary services model gaining traction.
“Three years after the unprecedented hardships our industry faced due to the pandemic, hotels continue to make significant strides toward recovery,” said AHLA President & CEO Chip Rogers. “2022 saw one of the strongest summer travel seasons ever, and this year we expect hotels to reach new heights in terms of room revenue, room-night demand and state and local tax revenue. But when inflation is taken into account, our industry likely won’t see full recovery for several more years. Nevertheless, hotel performance is trending in the right direction – great news for our industry and our employees, who are enjoying better pay, more career opportunities, upward mobility and flexibility than ever before.”