Air Of Uncertainty
ALIS Conference Kicks Off With Short-Term Concerns, Long-Term Optimism
LOS ANGELES—The ALIS Conference kicked off the annual industry event circuit for 2022 with an air of uncertainty as the Omicron variant continues to curtail travel, however, many executives expressed optimism that the recovery will gain further momentum in the year ahead.
The point was underscored by a trio of executives from leading hospitality research firms during the opening session entitled “The Numbers: What To Expect In ’22 And Beyond.”
Carter Wilson, SVP, consulting and analytics, STR, sees the lodging industry building on a strong 2021, which had in many cases exceeded expectations fueled largely by leisure demand.
“Despite a little bit of a slow start and the short-term concerns about Omicron, as well as some longer-term concerns about inflation and labor supply, we believe 2022 is also going to be a very strong recovery year,” he said, further adding that STR’s forecast from November remains largely intact.
For 2022, STR is forecasting occupancy of 63.8 percent, an ADR of $134 and RevPAR of $86, the latter of which is down only 1 percent from 2019 levels. In 2023, those numbers are expected to grow to 66.1 percent, $140, and $92, respectively.
Wilson did acknowledge the impact of the Omicron variant, however, he described it as a “short-term” problem with a minimal overall impact.
“As we look into the first few weeks of January we are seeing some softness there, but I think that kind of belies the fact that January is not necessarily a tremendous leisure month to begin with. It’s also kind of exposing some of the underlying softness in both group travel and corporate travel,” he said.
That softness in business travel was a point of emphasis among the participants, all of whom remain skeptical that any meaningful uptick will take place this year. Cindy Estis Green, CEO and co-founder, Kalibri Labs, noted that the return of commercial business “will really be what drives the recovery” as she put the task in context.
“We’re down 20 percent so it’s a question of how quickly we can recover that 20 percent,” she noted.
Wilson amplified the point asserting that business travel may not fully return until 2024.
“The overall recovery will already be there. But if you’re talking about 100% of each segment I think there’s still a long way to go, especially on the group side of the equation,” he said.
Michael Grove, COO, HotStats, suggested the paradigm may have changed forever.
“I wonder if we’re ever going to return to the 2019 business mix anyway or if that is actually the way things will look in the future. The pandemic is going to force these things to evolve. So actually we’re not waiting for the same level of group to come back that we were in 2019 or the same level of international corporate business,” he said.
In offering some final thoughts, Carter emphasized that rate has been “strong through the pandemic, certainly relative to what we saw happen in 2009. That’s been very heartening to see,” he said.
He did caution, however, that any return of group business, while largely positive, could have a negative impact on rate as leisure business is generally “higher rated” and more profitable.
“As groups start coming back just be aware that we could see a softening of rate in certain markets. It’s all for the best because groups are coming back, but just understand that groups are much lower rated in terms of what they’re willing to pay so you might see softening of rate relative to that,” he said.
Meanwhile, while leisure business has been driving the recovery, Estis Green also acknowledged there could be a bit of a recalibration in the months ahead.
“One of the reasons that leisure had been especially strong is there wasn’t that much competition from the Caribbean or Europe or other kind of destinations so we were able to contain a lot of that demand within the U.S. market. So there will be some kind of drop-off when those kind of trips become possible again or are made easier,” she noted.
Estis Green, meanwhile, urged hoteliers to “be mindful of your business mix” and called attention to a trend that has seen an increase in Thursday and Sunday business for hotels within the U.S. She noted that spike represents an opportunity for hoteliers.
“It’s a consumer behavior that we want to persist and there’s nothing wrong with building promotions around it and trying to take advantage of that mix. If you get more and more of those stays it will make up for some of that commercial business, the portion of it that may never come back, and think it will make up for it and then some. I think there’s a lot of silver linings and I feel super optimistic about what’s coming, but you really have to be much more thoughtful about your composition of RevPAR; it’s not all equal,” she concluded.
