Hotel Downturn Eases in Q1, Signaling Recovery Underway

  • Q1 2021 likely marked the last quarter of RevPAR declines for the U.S. hotel industry during the COVID-induced downcycle. Recent improvements in demand, air travel, operational viability and asset pricing indicate that a recovery is firmly underway.
  • RevPAR declined by 34.9% year-over-year in Q1 to $42.36 on the back of a 17.5% decline in occupancy, luxury hotel closures, continued weak business travel and general pricing pressures.
  • Approximately 16% of luxury hotel properties were closed at the end of Q1 after peaking at 54% in April 2020. As these higher priced hotels reopen, overall rate growth should accelerate. The closure rate of all hotel properties stood at just 4.6% at the end of Q1 2021.
  • Drive-to leisure destinations continued to lead the recovery, but recent increases in air travel show early signs of improvement in longer-haul leisure travel and the potential for an uptick in business demand. Q1 air travel was down by 40% year-over-year after bottoming out at a 96% decline in April 2020. Additional improvement is expected during the leisure-heavy summer travel season.
  • Among the chain scales, luxury and upper-upscale hotels had the biggest decreases in occupancy and ADR, while economy and midscale hotels had the least.
  • The top 10 performing markets in Q1 all had declines in RevPAR of less than 35% from the last pre-pandemic Q1 level in 2019. Virginia Beach was the best performer, down by just 15.6%. Nine of the 10 markets were in the South or southern California.
  • Five business- and tourist-dependent markets had year-over-year RevPAR declines of more than 75%: New York, Boston, San Francisco, San Jose and New Orleans.