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Recovery forecasts of lodgings sector remain unchanged: Fitch 

27 Sep 2021

Recovery of the global lodgings sector will not be fast tracked despite the recent easing of travel bans in the US and the UK, stated Fitch Ratings.  According to Fitch Ratings, these recent positive developments in the US and the UK are overshadowed by the prevailing travel restrictions in other countries, low worldwide vaccination rates, and the likely slow return of business travel.  Therefore, the research company will maintain its long-term lodging sector recovery trajectory under which the revenue per available room (RevPAR) is expected to reach the 2019 pre-pandemic levels only by 2025; once vaccinations increase, safety concerns ease and business travel improves.  The US announced last week of its plan to open its borders from November to allow foreign nationals from certain countries to enter the US with proof of vaccination and a negative Covid-19 test obtained three days prior to air travel. This decision was made after many countries, including the UK, had already opened their borders to fully vaccinated Americans.  Despite these positive developments, dozens of other countries continue to ban non-citizens from entering their country. According to the destination tracker of the World Tourism Organisation, 45% of Asia, 28% of Europe, 21% of the Middle East, 13% of the Americas, and 4% of Africa have restrictions on entry for air travel in place as of 21 September.  Furthermore, the travel status of countries who have opened their borders may change suddenly due to the prevailing uncertainty regarding the course of the pandemic as new variants spread.  Currently, over 55% and 68% of the populations in the UK and the US have been fully vaccinated, but the worldwide vaccination rate still remains quite low at 32%. However, this represents an improvement compared to the worldwide vaccination rates reported at the end of June which stood at less than 10%. Further progress in global vaccination rates are expected due to the implementation of vaccine mandates, increased access to vaccinations for developing countries, and the potential near-term availability of Pfizer’s vaccine for young schoolchildren.  However, according to Fitch ratings, easing of travel restrictions isn’t expected to have a significant impact on lodging sector ratings as stay-cations will be the popular choice among travellers during 2021.  While the recovery of the global lodging sector is in progress, recovery in Europe is currently lagging behind other regions. At its lowest level RevPAR in Europe fell to around 80% lower than pre-pandemic levels and only started recovering in the summer of 2021 due to increasing room rates and domestic demand.  In comparison, the RevPAR in the US and Asia Pacific regions fell only to around 50% of its pre-pandemic levels and started recovering during 2020 itself.  According to Fitch Ratings forecasts, RevPAR recovery levels of all regions are expected to converge at around 80-85% of the pre-pandemic levels by 2022 despite the current divergence observed in recovery between regions, and to reach the 2019 pre-pandemic levels by 2025.  The current trend of lower price point economy and the midscale segment outperforming upscale segments is expected to continue while international and business travel remain weak, stated Fitch Ratings.  Recovery of business travel is expected to remain slow over the perceivable future, as most companies have suspended non-essential business trips and reduced convention activity. While there is some appetite for in-person meetings, the success of video conferencing during the health crisis, post-pandemic cost-savings programmes, and the secular trend towards remote work will also impact the recovery of business travel.


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