Why Hotels Need To Stop Obsessing About 2019

December 7, 2021 | Lloyd Biddle, Director of Enterprise Solutions

First, we must take a step back and ask why are people using 2019 as a benchmark to recovery? And the reason, as we all know, is that 2020 data is worthless. A lot of hotels were closed, those that were open were running on low occupancies, with low staffing levels and with large chunks of inventory out of commission – either to facilitate social distancing, or for deep cleaning, or because it simply wasn’t worth marketing them – the demand wasn’t there.

strategy-before-forecast-social[This blog is an extract from our latest Special Report,  Strategy Before Forecast: Open Up Your Revenue. Discover revenue strategy top tips from industry leaders from CBRE, ProfitSword, EY, Accenture, and more, as you plan for 2022 and beyond. Download today: https://www.duettocloud.com/special-reports/strategy-before-forecast]

Also, many hotels found themselves catering to different clientele: homeless people, healthcare workers, essential workers, etc. Market segmentation is very skewed. 

And therefore 2019 became important as a benchmark because 2020 data was not reliable. Now we are planning for 2022 and we must accept that 2022 is three years removed from 2019. That is not a fair comparison.

But there’s more to this.

2019 was the golden year. It was the best year ever for the hospitality industry. In the US,

absolute ADR and RevPAR values were the highest  STR has ever benchmarked. According to STR, the industry also set records for supply (more than 1.9 billion room nights available) and demand (1.3 billion room nights sold).

In 2020, the first two months of the year were better than in 2019. It's just when March hit that the bottom fell out.

Comparing 2019 to 2022 is like comparing Steph Curry to Michael Jordan, or Cristiano Ronaldo to Pele. We are comparing a current player to one of the all-time greats. It makes sense at first, but as you dig into it, it's not a fair comparison.

What we are hearing from Duetto users is that, while there is still a lot of uncertainty, 2021 has been somewhat stabilized in terms of segmentation, consumer booking behavior, and demand patterns. And as such, hotels are moving back to benchmarking on year-over-year changes.

We know that incentives and bonuses are coming back and those are going to be predicated on year-over-year changes. We also know that a lot of the benchmarking services are telling us that year-over-year change is going to be more important in 2022 than it was in 2021 (because 2020 data was so unreliable).

Rebound, Recovery, or Restart?

Industry analysts are telling us that it is going to be a while until we return to 2019 occupancy and ADR levels, possibly until 2023 0r 2024. However, ADR has held up, occupancy has not.

What we must consider is that this current cycle was brought on by a disruption, not a traditional downturn. So, it's not a traditional recovery. As such, saying that it's going to take us 4-5 years to recover is almost an oxymoron.

It's a restart and it's not following previous cycles: post 9/11, post great recession, what happened was occupancy started to return, and once that demand starts to return then you are able to push rate. Right now, the industry is pushing rate. Prices have held throughout this entire disruption - occupancy has not, so it's not a usual recovery, it's not a usual cycle where we're flowing through peaks and troughs.

But we do know from 2021 data that domestic leisure travel and those within a drive radius of hotels will remain fundamental. We also know the market will shift in line with COVID case counts. And from this, we can build out our strategies for 2022 and beyond. We need to remain forward-focused. 2019 is in the past and thankfully 2020 will soon be a more distant memory.

Download your free copy of Strategy Before Forecast: Open Up Your Revenue here:  https://www.duettocloud.com/special-reports/strategy-before-forecast

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