Adam Sacks, president of Tourism Economics, presents at the Hotel Data Conference in Nashville An ‘all-out brawl’ for travel’s return to normalBy Rob Schneider | August 10, 2023Share President of Tourism Economics said while his company is expecting a recession to start in Q4, he thinks there is still room for travel to grow. While there are projections for a recession by the end of this year, there are plenty of indicators that the travel sector will not suffer like it has in previous economic downturns, according to Adam Sacks, president of Tourism Economics.Sacks, during his presentation at Hotel Data Conference on Thursday in Nashville, said “we are likely going to encounter a recession by the end of this year that will go into 2024.”But Sacks said several data points make him conclude that the travel sector still has room to grow. He said to expect a battle.Over the next year, there’s going to be an all-out brawl between an economic downtown and a return to normal for travel. All I want to say is, let’s put all of our money on normal.Adam SacksShare this quote“Over the next year, there’s going to be an all-out brawl between an economic downtown and a return to normal for travel,” Sacks said. “All I want to say is, let’s put all of our money on normal.”Tourism Economics is an Oxford Economics company that provides analytically based consulting to the tourism sector.Sacks said because of trends in housing, consumer debt and sentiment, interest rates, a tightening of lending and a manufacturing sector slowdown, the data points to the economic slowdown starting in the fourth quarter of 2023 and continuing into 2024.But Sacks said it won’t look like other recessions.“It’s going to be mild because there are no glaring balance sheet imbalances,” he said. “And, secondly, labor markets in this downturn will be, I would say, uniquely affected in a very limited way.”Sacks said there are a number of factors that point to travel still continuing to hold steady in the following year:- While lodging numbers could be slightly softening right now, air travel is holding steady compared to 2019.- Consumer spending is not normal, with the service sector still below where it ought to be.- There are also signs that consumers are beginning to shrug off inflation, with total savings still up $1 billion compared to three years ago.Sacks also said the backstop of business will hold in ways it hasn’t in past recessions:- 34% of remote workers say they plan to travel as they work remotely.- Business travelers also expect to take more trips in the next six months.- And while outbound travel is now more than fully recovered, international inbound travel is still recovering. Sacks said the expectation is it should recover and will create a surplus again by the end of 2024.From left: Patrick Mayock, CoStar; Amanda Hite, STR; Deanne Brand, Host Hotels, and Liz Uber, Extended Stay America“Even as a recession comes on the scene, we expect room demand to continue to grow to narrow the gap and make its way to ‘normal,’” Sacks said.Lower growth projectionsBased on the projections for a coming recession and other factors, STR and Tourism Economics also lowered their year-over-year growth projections in the revised 2023-24 U.S. hotel forecasts, which will also presented at the Hotel Data Conference.Amanda Hite, president of STR, said the projections were lowered half a percent to 4.5% year-over-year growth, compared to the original projection of 5%.She said the bulk of that growth has already happened in the first two quarters of 2023.There’s not a lot of new supply,” she said. “With this revision our supply growth rate is up 0.4%. In my time in 18 years, I’ve never seen supply growth below half a percent for the industry. So new supply is really not an issue at all and will help.Amanda HiteShare this quote“We expect occupancy in the third quarter to be flat, so the RevPAR growth will come completely from ADR,” Hite said. “In the fourth quarter we expect to see a slight drop in occupancy. The growth will come from ADR.”Hite said the first quarter of 2024 is projected to be similar.“When we look back at the last 6-7 months, we have underestimated ADR. And demand has been spot-on or slightly below what we were forecasting,” she said.Hite said the revision also took 2024 RevPAR down by a half a percent. But she said the revision is also taking the supply growth rate way, which she said should help overall growth.“There’s not a lot of new supply,” she said. “With this revision our supply growth rate is up 0.4%. In my time in 18 years, I’ve never seen supply growth below half a percent for the industry. So, new supply is really not an issue at all and will help.”Hite said for the projection for the rest of 2024 is for both positive occupancy and ADR gains, which will contribute to RevPAR growth.