The path to recovery for US hospitality

Vik Krishnan shares his views on where the US hospitality sector is headed and poses five questions for industry leaders to consider postpandemic.
Video
Recovery of the US hospitality industry
What’s next for the US hotel sector and what questions should industry leaders be asking?

Things are starting to look up for US hospitality, which is picking up the pieces from the devastation dealt by the COVID-19 pandemic. In this video conversation recorded in May, McKinsey partner and North America travel practice leader Vik Krishnan explores the pandemic’s impact on the hospitality sector and forecasts what’s to come. He concludes with five key questions industry leaders should be asking themselves.

  • COVID-19’s impact on the hospitality sector. Brands play an outsize role in the US hotel industry, making up 73 percent of the $245 billion sector (by revenue) in 2019. In April, US hotel occupancy rebounded to about 65 percent of pre-COVID-19 levels, although room rates remain depressed. Many brands have also recovered or even exceeded their prepandemic market capitalization from the pandemic’s lowest point, when they were trading at around half their precrisis values.
  • What could happen next. Leisure travel is expected to drive recovery, especially in outdoor, beach, and nature-focused destinations. Revenue per available room is not projected to return to prepandemic levels until 2023, because of the slower recovery of corporate travel. Meanwhile, the pipeline of new hotels under development remains healthy.
  • Key questions to ask. Among the priorities industry leaders should be reexamining include whether resources are being appropriately channeled to pockets of emerging demand, the terms and conditions of prepandemic contracts, and the long-term fundamentals of their organizations’ business models.

Watch the video to find out how real estate investment trusts (REITs) are doing in relation to hotels, which American destinations are bouncing back with greater rigor than others, and other implications leaders should be aware of.