Hotel occupancy is likely to decline by 29% over the next 12 months, leading to revenue losses of as much as $75 billion, according to a new study from business strategy outfit Magid and hospitality industry consultant Howarth HTL.
While the forecast is driven by anticipated drops in both business and leisure travel, the aversion to traveling for work seems the sharpest. Consumer sentiment for attending a meeting or conference over the next 12 months has dipped by 22%.
“The forecast shows the continuing significant impact COVID is having on hotel occupancy,” said Magid vice president Rick Garlick in a statement. “Currently, the forecast suggests a 39% decline in occupancy for the next month. If the average occupancy at this time of the year (summer) is 70%, this would put current occupancy around 43%.”
The figures come from the Magid HTL Forecast Tracker, which uses a baseline of self-reported consumer travel behavior collected 12 months prior to the pandemic breakout in March 2020. The forecast takes into account both “reach,” or the percentage of the population who plan at least one travel experience within the next 12 month, and “frequency,” or the anticipated number of experiences for the designated time frames. One finding from the study is that “frequency” remains stable from the pre-COVID baseline. The takeaway is that while a smaller percentage of people are planning to travel, those that do will likely do so at the same pace as they did prior to the pandemic.
“Many hotel companies are creating new forecast models for the remainder of this year and next without the benefit of insight into the mindset of the traveling consumer,” said John Fareed, Chairman, Horwath HTL, America. “This data will allow hoteliers to better understand the customer’s intentions and create marketing offers to consumers that will position them to survive and thrive this crisis.”
Looking further ahead, 71% of consumers expect to next stay in a hotel two years from now. That’s down from 89% who said so in March and the 74% who said the same in the beginning of June. Only 56% of consumers said they expected to next stay in a hotel a year from now, compared to 62% who said so in June and 79% who reported the same in March.
The forecast is more bullish on vacation rentals. While these are currently expected to be down 64% for the last part of the summer, they are expected to return to normal in 12 months.