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PwC: ‘Headwinds’ Threaten 2023 U.S. Hotel Recovery Pace

U.S. average daily hotel rates and revenue per available room in 2023 will continue to climb, but at a slower and more manageable pace, according to PwC’s recently released U.S. Hospitality Directions report. 

“U.S. hotels will see RevPAR finish at record highs this year, but economic headwinds are expected to continue to strengthen in 2023, threatening the pace of recovery” U.S. hospitality and leisure managing director Warren Marr noted in the report. 

Taking those economic headwinds, such as persistent inflation and a PwC-projected decline in leisure travel into consideration, the company revised its outlook for 2023. The company now projects hotel occupancy rates in 2023 to hit 63.6 percent, which is slightly below PwC’s previous projection in May.

ADR in 2023 is forecast to rise 4.5 percent year over year to $155.81, while RevPAR is projected to rise 5.8 percent to $99.12—nearly 115 percent above pre-pandemic levels—according to PwC. While still steep, both ADR and RevPAR increases would be lower than the sharp rate increases of 2022.

However, PwC still expects demand from individual business travelers and groups to rise in 2023. 

“In 2023, we expect demand growth from individual business travelers and groups to continue to offset a softening in leisure demand, with outbound international leisure travel outpacing inbound, given the relative strength of the dollar,” according to PwC. 

Travel demand skyrocketed this summer, following the ease of domestic travel restrictions and pent-up demand, but will slow going into 2023 as travelers remain cautious about the changing economic environment and “potential emergence of more potent variants of the virus over the winter months, and the ongoing conflict in Ukraine,” according to the report.

As for development and expansions growth, “the Fed’s monetary policy has resulted in significantly higher interest rates than previously expected over the period covered, resulting in an estimated steep slowing of construction starts for new hotels next year,” according to PwC.

As for the rest of the year, U.S. full-year ADR in 2022 is projected to increase 19.3 percent year over year, pushing RevPAR to record highs by the end of 2022—up nearly 108 percent over 2019 levels. according to the report.

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