- October 14, 2021
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2022 – A Magical Year or More Misery?
That’s easy – our hospitality forecast says the bumpy ride is coming to an end. We should assume 6 more months; October through March might remain uneven or bumpy. Why? Because business travel is not back and group business is just starting to book going forward. International travel will likely return in April, 2022 when we should be back to 2019 numbers. The 2022 hospitality forecast says you should hang in there!
At the Lodging Conference, Bernie Baumohl, Chief Global Economist of the Economic Outlook Group, my favorite and Wall Street Journal’s #1 most accurate economist was a main draw for me at this great conference. While he placed a caveat that his forecast is based on no debt default by the US (the debt ceiling is October 18, 2021) and no $3.5T bombshell White House giveaway, his information was timely and interesting. He did bake in the $1T infrastructure package currently being finalized (hopefully) in Congress. Based on the economic outlook and hospitality reality, here are our thoughts.
Most hospitality operators are smack in the middle of budget season. Business plans should be done, budgets should be in process and according to Bernie Baumohl, the consumer price index is up between 4-5% and will slow to 2-3% by mid-2022. He talked about the mismatch of skills that technology providers are facing and made some predictions (those mismatches could bode well for hospitality as we have struggled to hire and do not need all employees to be tech-savvy).
While inflation has put a dent in consumer confidence lately, Bernie forecasts an impending inflection point that could send some advantage back to consumers. Our concern is that it could lead to deflation but we can hope that he is right and inflation pressures will come down to 2-3% by 2023.
Bernie Baumohl’s forecast for business travel is that 90% will come back in the next year or so, vaccine boosters and vaccination plans for children will stimulate more travel and international inbound travel to the U.S. will pick up. With the caveat of no more major virus shocks, the passing of the U.S. infrastructure spending package, and a raised or suspended debt ceiling, Bernie said, “recession is off the table for the next five years in the U.S.”
STR reported that profit margins improved in July due to the combination of demand and leaner hotel operations. Their overall status report on the industry is:
GDP continues to set new records and they forecast most markets will return to full employment by mid-2022. Their takeaways were:
While plenty of waves could rock the ship including supply chain disruptions, Bernie seemed pretty bullish on 2022, especially beginning in Q2. May we all hang on until then and have a great recovery year ahead!
Bob serves as CEO and President of RAR Hospitality. He is an internationally recognized hotelier with over 40 years of hospitality-related management experience. Recognized by his “hotel guru,” moniker, Bob shares insights and industry trends at www.hotelguru.com. He has held nearly every position in the hotel business including General Manager of full-service four Diamond hotels for Hilton and Embassy Suites.