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Analyst gives lodging industry outlook

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Copyright © 2021 Roswell Daily Record

Rural and suburban New Mexico should be in a good position to rebound in terms of travel and tourism once COVID-19 spread has lessened and restrictions are lifted, according to an industry analyst.

Nationally, leisure driving travel began to resume in summer 2020, according to Jan Freitag, senior vice president of Lodging Insights and STR, formerly known as Smith Travel Research.

He spoke Monday at a virtual Trends Conference on Hospitality sponsored by the New Mexico Chamber of Commerce and other business groups.

Leisure flying is occurring some, he said, but not in significant amounts.

But group travel — what Freitag said is essential to profitability by hotel and lodging enterprises — is not projected to recover until April 2021 at the earliest, and that would involve regional travel or travel among Canada, Mexico and the United States.

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“There will not be any material influx of international travelers into the United States for quite a while,” he said.

He explained that international business travel probably will not resume until August 2021.

Freitag said that pent-up demand is expected to be unleashed, but the key to travel recovery will be when large numbers of people are vaccinated or, as a more remote possibility, upon the availability of inexpensive, accurate and instant COVID tests. That way people can be assured that everyone on an airplane or in a conference room or banquet hall has tested negative immediately before entering.

Lodging businesses in rural or suburban areas are likely to recover before those in densely populated metropolitan areas, Freitag said.

People’s preferences for scenic outdoor recreation or less populated areas have been felt during the pandemic, he said, which meant that New Mexico’s lodging industry has not suffered as much as the national industry as a whole.

National revenue per available room (RevPAR) decreased by 80% in April 2020 compared to the year before and was at 51.2% of 2019 levels by December.

In New Mexico, RevPAR dropped to 71% of 2019 levels in April but was at a 42.3% decrease in December 2020 compared to the year before.

New Mexico lost about 1.5% of its lodging rooms due to operations having to close, Freitag said, but that was significantly better than the national picture. About 3.4% of rooms in the United States have gone off the market as lodging businesses have closed.

To be certain, the effect on the industry has been enormous, he said. The industry had its best RevPAR growth in its history in 2019. Then came the pandemic.

“Over two years, we have wiped out two decades of RevPAR growth,” he said.

Room demand will reach 2019 levels by 2023, Freitag predicted. The Average Daily Rate (ADR), or the average rate paid for an occupied room, is expected to be back to 2019 levels in 2025.

During 2021, occupancy will increase about 23% and room rates will increase about 5%. RevPAR growth will be at a record level of 30%, but that still will not bring the industry back to 2019 levels. RevPAR will not reach 2019 levels until the fall of 2024, according to current data.

Senior Writer Lisa Dunlap can be reached at 575-622-7710, ext. 351, or at reporter02@rdrnews.com.