In its U.S. Hospitality Directions report for November, consultants PwC said that In 2023 the company expects demand growth from individual business travelers and groups to continue to offset a softening in leisure demand. Growth in both occupancy and average daily rate (ADR) is expected to result in a year-over-year increase in 2023 in revenue per available room (RevPAR) of 5.8% — approximately 115% of pre-pandemic levels.

Through the third quarter of this year, according to the report, the US hotel industry has exceeded 2019 (pre-pandemic) RevPAR levels by 6.4%, based on data from STR. The recovery narrative continues to be centered around room rates. While occupancy through the third quarter of 2022 was 3.8 points below the same period in 2019, ADR had increased 12.8%.

The Fed’s continued increases in its policy rate has caused uncertainty in the public markets, affecting lodging in the fourth quarter, according to PwC. The company now expects annual occupancy for US hotels this year to increase slightly less than in its May 2022 outlook, rising to 62.8%.

Since July 2021, average daily room rates surpassed comparable 2019 levels in every month but one (January 2022 missed by $0.35). Since March 2022, RevPAR has exceeded comparable 2019 levels. PwC now expects ADR to increase 19.3% for the year, with resultant RevPAR up 30.3% — approximately 108% of pre-pandemic levels, on a nominal dollar basis.

Significant risks to this outlook, according to PwC, include the pace and magnitude of changes in the macro-economic environment, the potential emergence of more potent variants of the virus over the winter months and the ongoing conflict in Ukraine.