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The COVID-19 global pandemic created an unprecedented disruption in the world economy and similarly affected the hotel market in Q2. According to the Bureau of Economic Analysis (BEA), GDP fell 32.9% at an annual rate, driven by large reductions in consumption of services and fixed investment.

Food services and accommodations, one of the hardest hit sectors, contributed -5.55% to overall GDP growth.  Although -3.98% from investment’s contribution could be attributed to a draw down in inventories, fixed investment contributed -5.38% in Q2.

Total nonfarm payroll employment decreased by an astonishing 18.2 million jobs in Q2, according to the Bureau of Labor Statistics (BLS). The unemployment rate reached 14.7% in April but was 11.1% by June. A two-to three-year employment recovery means roughly the same for lodging demand.  

Inflation as measured by the Consumer Price Index (CPI) was 0.5% as falling demand exerted downward pressure on prices. CBRE EA forecasts CPI to barely increase in 2020. Any changes to ADR in 2020 will reflect real value changes rather than nominal changes only.

Our baseline outlook for the U.S. predicts real GDP change of -5.1% in 2020; however, the recent crisis differs from previous downturns. Social distancing remains a prominent feature for the foreseeable future, creating a lengthy recovery for hotels. We anticipate introduction of useful therapeutics in 2021 and eventual recovery of the lodging sector to pre-COVID levels in demand first by 2023, followed by revenue.