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U.S. Lodging Industry Overview

Elaine Sahlins • 3/8/2023

Year in Review 2022: A Rising Tide Helped Lodging Sail Past the Sirens  

The post-pandemic recovery was well underway across the U.S. lodging industry in 2022. Despite a rocky start to the year with the continued influence of the Omicron variant, year-end U.S. hotel revenues were 44% higher than in 2021. As expected, the gains were dominated by room-rate growth. After a rocky start in the first quarter, overall demand was up 11%, while the average daily rate was up over 19% by the end of 2022. In nominal terms, the average daily rate (ADR) in 2022 set a record, exceeding the prior peak of $130.98 set in 2019. The recent annual performance is summarized below. 


Hotel Supply is Slowing 

In 2022, occupancy registered a strong improvement to 62.7%, which is still below the peak of 66% in 2018. Although the number of room nights sold in 2019 was 1.6% higher than in 2018, the increasing hotel inventory in the U.S. has been steadily growing. Since 2018, supply growth increased a total of 4.5% from roundly 5.3 to 5.6 million occupied room nights while demand was flat in 2022 relative to 2018, at approximately 1.3 billion occupied room nights a year.  

Rooms that were closed or changed to other uses because of the pandemic have been more than replaced, and the pace and revenue performance recovery in 2021 and 2022 has reinvigorated developers. STR reports that after over two years of contraction, the pipeline increased in December 2022. New projects in planning stages continued to increase, and development projects that have been paused during the pandemic resumed, resulting in a larger number of rooms under construction. As a ratio of existing supply, the luxury segment has the most rooms under construction. Consistent with the trends of the past decade, the largest volume of hotel rooms under construction are in the upscale and upper upscale segments. These are typically wood-frame, select-service hotels that are more efficient to build and more profitable to operate.  

Outdoor-Oriented Lodging a New National Category 

Demand for leisure lodging and lower rates has also influenced a new wave of hotel product. Outdoor-oriented lifestyle lodging, often marketed as affordable, is becoming a new national category. Brands such as Autocamp and Under Canvas offer non-traditional lodging units in Airstream trailers and luxury tents. Hotel upcycling and sustainable practices are helping to drive this growing segment as well. Neil DiPaola, who founded Autocamp, is opening Field Station hotels in outdoor destinations by redeveloping existing older hotels. Starwood and AJ Capital Partners recently launched Field & Stream, an outdoor-focused hotel brand that will also seek to grow with conversions of older hotels. Smaller hotel brands, such as Basecamp and LOGE Camps, are establishing market presence in local drive-to outdoor destinations. This expanding segment is part of the evolution of hotels that offer experiences—expanding from room rentals and restaurants to providing activities and events on a regular schedule. 

With higher interest rates and construction costs, conversion of older properties presents a stronger investment premise than new building in many markets. Hilton’s new brand Spark, IHG’s Voco, and Best Western’s Vib are all actively promoting their conversion programs. New hotel construction is still expected to be modest over the next few years.  

Segmentation Changes—Permanent or Temporary? 

2022 was a year of recovery for many hotel markets across the U.S., and the trend is anticipated to continue in 2023. While revenue per available room (RevPAR) forecasting is unanimously positive from market participants and industry experts, the strength of the gains varies widely. As recently noted by Citibank, RevPAR outlooks from leading industry consultants ranged considerably. STR modestly raised its 2023 forecast outlook to +3.7% (from +3.4%) with Lodging Analytics Research & Consulting (LARC) at 6.8% RevPAR growth. These expectations reflect a slower recovery pattern than in 2022, framed by differing views of a potential recession and a general caution after three years of unexpected impacts from the pandemic. 

The pandemic effects have been wide-ranging, from the initial government responses that halted travel and then provided financial assistance—some of which was spent on travel—to challenges in the labor market. The shifts in hotel demand patterns are likely to be the longest lasting. By the summer of 2020, leisure travel boomed for outdoor destinations, particularly from drive-to travelers. Downtown markets dependent on transient business and large-group demand faltered with corporate restrictions and the expansion of remote work. With a moderated business travel sector, secondary sources of demand prior to 2020 are being competitively pursued including retirees, remote workers, construction and infrastructure crews, and sports teams. These hotel users have been particularly beneficial to lower-rated properties. While many participants are anticipating higher room rates in 2023, some market participants are concerned that the lower level of business travelers could stagnate rates.  

Evolving Effects of Remote Work 

Remote work and return-to-office patterns are still evolving. With fewer employees at office work sites, hotel use has also changed, particularly for urban properties. Mid-week transient business demand in urban markets is still constrained. Virtual conference calls and meetings have become commonplace for everyday interactions, especially if an airline flight can be avoided. Just as drive-to leisure was the first segment to return in 2020, regional drive-to business trips are increasing. On the bright side, the use of group events for culture building, training and social engagement proved to be an efficient practice for many businesses. The strengthening of group demand may help those urban hotels that relied more heavily on transient business travel prior to the pandemic. Knowland, a provider of meeting market data and solutions, anticipates that on a national basis, this segment of the industry will be fully recovered to 2019 levels by 2023.  

While the mid-week national and global airline-based business travel is still well below pre-pandemic levels, the question of whether these shifts are structural is still up for debate.  

Improved International Travel 

According to the U.S. Travel Association, the restoration of international travel continues to be a critical part of a full U.S. economic recovery. The association does not expect international travel to fully recover until 2025. The reduction of vaccination and testing hurdles in 2021 and 2022 have improved inbound visitation, but external circumstances continue to suppress this segment. The number of international travelers to the U.S. in 2022 was constrained due to the strong dollar, higher global inflation, recession fears, the Russia-Ukraine War, and pandemic-related policies in several countries. The volume of outbound visitation to the U.S. from Europe largely is similar to 2019. Inbound travel from Asia is expected to steadily improve in 2023, as China lifted its travel ban at the end of 2022. This shift is especially important for San Francisco, Hawaii and other West Coast hotel markets that have accommodated most of this demand.   

Top 25 Markets

The top 25 markets, as defined by CoStar, continue to show varied performance. Leisure-driven destinations remain stronger performers, while urban areas dependent on business, convention and inbound international visitation remain below 2019 revenue levels. The following chart compares the performance of these markets between 2019 and 2022, ranked from smallest to largest percentage change. 


By mid-year 2022, eight of the 25 markets had RevPAR that was at or above 2019 levels, but that number increased to 15 by the end of the year. Of the remaining 10 markets, eight achieved RevPAR levels within 5% of their 2019 levels. San Francisco is in the middle of a perfect storm of turmoil, including the cost of debt, tech companies; a challenging perspective of social conditions; record high office and retail vacancies; and lagging convention attendance and limitations on its inbound Asian visitation. It continues to be the worst performing of the top 25 markets. Once a perpetual top-three hotel market prior to the pandemic, the city’s recovery is well eclipsed by the improvement of most of the other markets.  

Other Impacts on Lodging Performance 

Many of the issues resulting from the pandemic remain top of mind for the industry. 

  • Labor issues remain challenging. Hotels are still struggling with a shortage of workers, particularly in the culinary department. The hospitality sector has 500,000 fewer workers relative to 2020 levels. Among an aging population, many workers are choosing to either retire early or forego traditional white-collar jobs. Although the pay may be lower, hospitality workers are seeing opportunity in these types of jobs, with benefits and traditional work hours. Hotel payroll costs have soared in order to attract and retain workers. Hotel Management reports that hospitality wages have jumped 18% since 2019. Higher insurance costs add to the burden. Hotel operators continue to refine operational structures with fewer employees and to implement efficiency strategies to control costs.  
  • Cybersecurity investments remain high. Hotel companies, large and small, are receptacles of extensive personal information and continue to be targeted at many levels. 
  • Inflation has declined but is still high. Despite higher revenues, the increased costs of supplies and services continue to stress operating profitability. Hotel service practices continue to evolve, particularly in the housekeeping and food and beverage departments. Front desk staff are now trained to explain the options for daily housekeeping and the opening and closing hours of outlets. Individual properties are being operated as best serves their guests and operating environments. 
  • Sustainability practices are expected at all levels of hotels. Eliminating single-use plastics, sheet changes and housekeeping, and providing local food and beverage options are choices that are promoted by operators and sought after by guests. 
  • With dynamic pricing here to stay for corporate accounts, revenue management technology is critical. Operators continue to invest in new operating and sale systems to better yield rates and operate efficiently. Technology expenses will be an ongoing consideration in P&L statements. 
  • Many hotel PIPs postponed in 2020 and 2021 are now in process or being planned for 2023. While supply chain logistics have eased somewhat, costs of materials, FF&E, and labor are higher than prior to the pandemic. The continued increase in room revenue will be aggressively pursued for these hotels to support their return on investment. 

Hotel Transaction Overview 

Even against the broader context of a rising interest rate environment, hotel transaction activity held up relatively well in 2022, as several large, high-profile portfolio and single-asset transactions helped lift volumes to reach levels consistent with what was recorded in 2021.   


Note that transaction volume data includes trades of multi-property portfolios and some large gaming properties. Brookfield’s $2.8 billion acquisition of Watermark Lodging Trust arose as the year’s largest portfolio trade, encompassing 25 properties. Several other high-profile properties also traded hands, including the Montage Laguna Beach ($661 million), the Waldorf Astoria Washington, D.C. ($375 million) and the Sheraton New York Hotel & Tower ($375 million).  Other large transactions in 2022 included the $1.445 billion purchase of Woodspring Suites Hotels by Blackstone from Brookfield and Summit Hotels and GIC’s $766.5 million acquisition of 27 hotels from NewcrestImage.  

Notwithstanding the relatively strong volume posted in 2022, brokers reported that numerous deals were withdrawn, re-traded or postponed through 2H 2022 due to the rise in interest rates, resulting in lower-than-expected year-end results.  

Despite the relatively tumultuous and volatile interest rate environment, hotel assets remain an attractive investment prospect given strong revenue performance. Investors remain drawn to luxury hotels in high barrier-to-entry markets and destination resort properties. In addition, prevailing hotel acquisition investments are increasingly supported by attractive discounts to replacement costs and by a diminishing supply pipeline. Transactions that include the assumption of well-priced debt have also grown more appealing.  

Refinancing has been more challenging, although valuations have improved since the nadir of the pandemic. About $15 billion in hotel CMBS loans are coming due in the next two years. Market participants are waiting to see if extensions and forbearance will postpone actual refinancing transactions until interest rates moderate. While the timing of debt maturity may cause some owners to sell or recapitalize, the prospect of distressed transactions is not universally expected.  

Investor Profile 

Private equity buyers, including family offices, generally comprise the largest group of hotel buyers, though that share shifted in 2021 with institutional and equity funds growing more active in the wake of pandemic. Many participants are reportedly first-time hotel buyers, having been attracted to the asset class as an alternative to other investment options. 



Despite the sector’s relatively healthy revenue performance conditions, transaction volume in 2023 is anticipated to moderate amid broader financial market volatility, macroeconomic uncertainty and rising interest rates. Buyers will continue to have the stronger negotiating position, although some sellers may not bring their properties to market until the macroeconomic climate is more favorable. Non-institutional property transactions, which can be financed by local and regional banks and SBA loans, are proving to be not as affected as larger institutional grade assets.  

Hotels’ strong underlying performance conditions have attracted a wider range of buyers than in prior years, all as traditional hotel buyers on the private side continue to selectively evaluate investment options as financial conditions ease. Private equity remains primed with substantial dry powder, providing further upward lift to projected volumes in the chapter ahead. The current high interest rate environment is viewed as more of a short-term challenge, while confidence abounds for longer-term continued hotel revenue performance. Transaction velocity is anticipated to rebound in the second half of the year. 

Conclusions and Outlook 

Sentiment is less cautious and more enthusiastic. Since the onset of the pandemic, uncertainty has framed every consideration of performance and investment in the hotel industry. With the positive performance trends in 2022 solidifying, most participants are more confident about continued positive performance. Some pundits are concerned that the poor recovery of business travel may hamper the improving trends. With the removal of most pandemic restrictions and an improvement in outcomes from COVID-19 infections, the uncertainty has moderated, and optimism is more universal.  

Consistent with the trends since the onset of the pandemic, nationally the lodging market is trending upward; locally, it varies. The patterns established in 2020 and 2021 supported the robust hotel market recovery in 2022. Strong drive to destination markets, impacted urban hotels, higher leisure demand and rates, constrained inbound international travel and group meetings as a substitute for individual business travel have shifted the overall performance of many markets. Some markets have thrived with these changes, and others have deteriorated. The individual market segments and performance may or may not be restored to their pre-pandemic structure. 

Despite the potential macroeconomic headwinds, an improving revenue performance in 2022 has shifted market sentiment. Uncertainty for many hotel market participants has morphed into a cautiously optimistic outlook with the improving performance metrics in the context of overall real estate investment choices. 



Whether you own or invest in a full-service hotel, a riverboat casino or a conference center, Cushman & Wakefield’s Hospitality & Gaming practice group offers a full range of valuation and advisory services to help you uncover what’s next for your properties.

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