Hotel purchases held strong throughout the first quarter of the year. More than $12.5 billion worth of hotels were sold in the first three months of 2022 as investors are betting on a strong pandemic recovery for the industry. Hotel occupancy rates remain at or above pre-pandemic levels and there is significant optimism that this summer may be one of the strongest ever for the travel sector.
As the hotel recovery moves along swiftly, robust earnings from top US airlines should only accelerate the travel industry’s recovery. Major US carriers are experiencing the strongest level of demand seen in three years as summer rapidly approaches. Business travel remains the missing component to complete a full recovery, yet it is expected to climb throughout the year and surpass last year’s levels with ease.
Related ETFs: Defiance Hotel, Airline, and Cruise ETF (CRUZ), AdvisorShares Hotel ETF (BEDZ), U.S. Global Jets ETF (JETS)
Hotel Industry Seeing Strong Demand Heading into Busy Summer Season
As the travel industry prepares for the busiest summer season in three years, key data points are pointing toward continued strength in the hotel sector’s recovery.
According to a report from CoStar, US hotel occupancy reached 66.4% in the week ending April 9, 2.3% higher than the previous week and just 3.3% below the corresponding week in 2019. This was the ninth-highest weekly rate since the beginning of the pandemic, yet luxury (72.2%) and upper-upscale (69.9%) rates set new post-pandemic highs.
Additionally, over the last nine weeks, the weekly average-daily-rate (ADR) has been above 2019 levels for that same time period, with the most recent week’s result coming in 11% higher.
Comparable results are being reported in Europe as well. Forward-looking flight and hotel search data from OTA Insight’s Global Market Insight Tool shows that as many as 3 in 4 Europeans are planning a spring or summer vacation across the continent this year. With restrictions easing, there has been a steady uptick in searches for both flights and hotels over the last month.
Investment into the hotel industry has also soared over the last few months, showing significant investor interest in the sector. The Wall Street Journal notes that more than $12.5 billion worth of hotels were sold in the first quarter of 2022, the highest first-quarter figure since 2016. The prices of those hotels are surging and the share of delinquent hotel mortgages recently fell to a new pandemic low.
On a year-over-year basis, hotel values increased 18% in March, rising faster than hotel profits, highlighting that investors are bullish about future demand from travelers. CoStar reports that in March, hotel room prices were 37% from a year ago.
Rising fuel prices have yet to dampen demand or leisure travel either. While higher gas prices are having a significant effect on American wallets, they are expected to…
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