Hospitality has been slower to rebound after COVID-19. But now? The sector appears to be gaining new life as restrictions continue to lift and people settle in to the “next” normal.
Marcus & Millichap’s recently-released Mid-Year 2022 Chicago Hospitality Market Report reflects positive stats across the board for the remainder of the year, largely due to the uptick in domestic and business travel.
With Chicago being a major hub for international travelers, Marcus & Millichap found the impact of COVID-19 on the sector to be more pronounced than in other markets that rely more heavily on domestic visitation. But tourism numbers rose 86% in 2021 when compared to 2020, and the recovery has continued into 2022, with annual hotel revenue up 166% year-over-year through May.
The return of business travel is important to acknowledge when considering these numbers, as average occupancy and nightly rates climbed the fastest during the last 12 months in and around the CBD.
Events are also returning to pre-pandemic norms, giving hotels an additional performance boost. And with the high price tag that comes with today’s Airbnbs, travelers are looking at hotels through a new lens. Once a budget-friendly option, Airbnbs are now just as expensive (if not more) than any hotel stay — and without the amenities of a fitness center or free breakfast.
The industry is doing so well, in fact, that builders have ramped up development going into 2H2022. The number of rooms under construction in May surpassed 3,000 for the first time since 2018, based on the report. Up-scale or upper midscale hotels make up roughly 60% of the pipeline, and ADR is expected to continue its upward trajectory and reach $150 by year-end. This is a 24.8% increase and more than $5 above the pre-pandemic average.
There are still challenges, of course, as faced by other sectors, but professionals expect the numbers to maintain their upward trend into the new year.
