Revenue Strategy Round-Up: Hotel & Airline Demand Returning by 2023-24

August 3, 2021 | Sarah McCay Tams, Director of Content, EMEA

Stay up to date with the latest trending hotel news stories that will impact your hotel Revenue Strategy.

1. U.S. Lodging ADR Recovery by Q1 2024

The latest research from CBRE Hotels Research forecasts that the average daily rate (ADR) will recover to pre-pandemic levels by Q1 2024. CBRE projects a 4.3% increase in ADR for 2021, followed by a strong 11.4% rise in 2022.

U.S. lodging demand will return to pre-pandemic levels by the fourth quarter of 2023, which will support price increases. However, occupancy gains will be offset by new supply, as new projects continue largely unabated. As a result, the recovery in occupancy will not occur until Q4 2025 due to greater supply growth during the 2020—2022 period Q4 2024.

Full story.

 

2. Airlines: Passenger Demand To Recover In 2023

International Airlines Group (IAG), the owner of British Airways, Iberia, Aer Lingus, and Vueling, announced it expects passenger demand will not reach 2019 levels until ‘at least 2023’.

Announcing its half-year results, IAG said it achieved passenger capacity of just 21.9% of 2019 levels in the quarter, up marginally from 19.6% in Q1, but at a half-year loss of more than €2 billion.

The group expects to operate around 45% of 2019 passenger capacity in its peak Q3 but says it will take “until at least 2023 for passenger demand to reach the levels of 2019”.

Full story.

 

3. Travel Becoming a Financial Priority With Consumers

The latest Traveler Value Index from Expedia Group shows that people are making travel a financial priority. More than a third (34%) of travelers have larger travel budgets now compared to 2020. The survey shows that 18% of respondents expect travel to be the activity they spend most on in 2021, while 36% say they would trade a pay raise for more vacation days.

Many (60%) are choosing domestic travel in the short-term, but planning to get away more often, with 41% wanting more frequent, shorter, trips.

However, 27% of travelers are considering a trip to another country in the next year.

Full story.

 

4. Pandemic Costs UK Hospitality £100.2 Billion

The latest edition of the UKHospitality Quarterly Tracker has stated that the country’s hospitality businesses have suffered a £100.2 billion drop in sales from pre-pandemic levels in the 15 months since the start of the Covid-19 pandemic

Total sector sales in the 12 months to 30 June 2021 were an estimated £59.8 billion, down by £72 billion from the previous 12 months. Adding on the second quarter of 2020, total sales in the last 15 months stood at £64.4 billion, £100.2 billion below the 15 months to June 2019.

However, recovery is underway. Estimated sales in the three months to the end of June 2021 totaled £18.4 billion, compared to £4.6 billion in the same quarter of 2020.

Full story.

 

5. Guarded Optimism at ALIS

Last week’s Americas Lodging Investment Summit (ALIS) reflected both the hotel industry's confidence and apprehension, according to Travel Weekly.

Several of the event’s speakers expressed cautious optimism about economic recovery for tourism and travel.

"The U.S. economy was roaring [before the pandemic]," economist and author Todd Buchholz told the audience. "Now, it's trying to get that roar back." Buchholz said the economic slowdown of 2020 was more of a "cessation" and not a "recession," which he said is harder to come back from. 

Hilton president and CEO Chris Nassetta was more upbeat: "The industry is emerging from what I think we'd all agree is some of our darkest days, and I feel we are now at the tipping point toward recovery."

Full story.

 

6. The Challenges of Calculating Customer Acquisition Costs

Dr. Meng-Mei Maggie Chen, Assistant Professor of Marketing at EHL, explained the difference between distribution costs and customer acquisition costs (CAC) and why the latter is hard to calculate, in her article on EHL Insights.

She outlined 4 reasons why CAC is impossible to measure:

  • Different departments have responsibility for different expenses. For example, the IT department is responsible for web-related expenses while Rooms is responsible for commissions.
  • Revenues and expenses are recorded differently between the agency model and the merchant model.
  • It’s challenging to identify direct channel costs.
  • The potential conflict of interest between owners and hotel brands makes it hard to define customer acquisition costs. 

Full story.

 

7. Five Priorities For Financial Survival

Boston Consulting Group and SkiftX have reported what they believe should be the top five priorities for travel company CFOs in the next 12-18 months to minimize financial disruption, ensure survival and thrive in the years to come.

  1. Manage Debt – The challenge will be to balance debt holder and rating agency demands while protecting the health of the business and being ready to benefit from the recovery. In short, travel companies need to manage debt aggressively.
  2. Build Operating Leverage – This is less about cutting costs and more about carefully managing bringing costs back. Keep fixed costs low while investing in areas that will fuel profitable growth, such as digital
  3. Invest In Long-term Growth – Invest in building the business for the long term.
  4. Understand Changes In Demand - Given the growth imperative and this uncertain demand recovery, companies need to invest in a market-sensing capability. Being truly agile has never been more important, according to Bosting Consulting Group.
  5. Engage With Investors - Communicating with analysts and institutional investors is critical right now.

Full story.

 

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