Summer travel demand likely to soar following relaxed US COVID-19 test mandate

In theory, a big boost to travel arrived earlier this week when the U.S. officially dropped its coronavirus testing requirement on travelers flying in from abroad.

Various travel organizations lobbied against the friction point in recent months, as many countries abroad dropped the practice, even though the U.S. typically sees a higher average daily count of reported cases.

Removing the testing requirement eliminates the potential of getting stuck in a foreign country — as some of our own know all too well — and could boost demand for travel to the U.S., the thinking goes. It should particularly benefit some of the largest cities in the U.S. that rely more on international travelers to fill up hotel rooms.

United Airlines reported a 7% jump in international travel searches following the decision to end U.S. testing requirements.

It's too soon to decipher if hotels saw an immediate benefit, and many companies won't report hard numbers until after the second quarter wraps at the end of this month.

But the industry appears upbeat at the potential for some degree of increase in international traveler demand.

"The removal of [COVID-19] testing requirements to enter the U.S. is another pivotal moment in the travel industry's pandemic recovery as we believe this decision will help further stimulate international travel," Jack Horne, Hyatt's global head of sales and revenue said in a statement to TPG.

"Summer 2022 continues to be one of Hyatt's busiest travel seasons with momentum across every segment of our business. Leisure demand at Hyatt properties in the Americas continues to pace well above 2019 levels, and groups, events and business travel levels are also making a meaningful return."

Soaring costs on everything from gas to airfare to hotel rooms have analysts expecting the travel sector to eventually take a hit while travelers try to trim costs. But the CEOs of hotel companies like Hyatt, Marriott and Hilton all downplayed such conjecture at the NYU Hospitality conference earlier this month.

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Their focus on higher-end brands as well as other demand generators coming to life like group, business and now international travel should offset any downturn.

At least, that's what executives hope.

"With this recent testing announcement, we anticipate a further increase in demand in the weeks ahead, and, as always, we will work with Hyatt hotel owners, operators and colleagues around the world with the health and safety of Hyatt guests and colleagues in mind," Horne said. "We are excited to usher in this new era of travel, and welcome back even more guests from around the world this summer."

No silver bullet

The removal of testing requirements still doesn't move the needle on one key source of inbound travel to the U.S.: China, which prior to the pandemic was the fastest-growing source of international visitors to the U.S., per U.S. Travel Association data on the top 20 inbound markets.

At the very least, it removes an obstacle for American travelers looking to go abroad — which might help international hotels more than those in the U.S.

"Maybe this is just the impetus that American travelers needed to jump on a plane and go abroad," said Jan Freitag, national director of hospitality analytics for STR's parent company CoStar. "The negative impact could be that for places like Miami Beach that have seen a tremendous run-up in room rates on the very high end ... They may not have the customers at quite the same high levels because the customers are saying, 'Oh, I can finally go back to Venice.'"

The spring and summer surge

Hotel brands around the world have plenty to celebrate even before peak summer travel demand picks up in the coming months.

Global hotel reservations have kept up with pre-pandemic booking levels since March of this year, according to data released Thursday from travel software provider Amadeus' Demand360 platform.

April was the first month during the pandemic where hotel occupancy exceeded 2019 levels, and the outperformance continued last month, when global hotel occupancy averaged 63% compared to 60% in May 2019.

Keep in mind, that this achievement happened even while China faced a new wave of travel restrictions amid a spike in coronavirus cases in Beijing and Shanghai. But countries like the U.S. (the world's largest hotel market) and Canada managed to notch impressive gains over pre-pandemic performance.

U.S. hotel occupancy in May averaged 68%, which was 7% above 2019 levels, while Canadian hotel occupancy averaged 64%, an 8% jump over the country's performance in 2019.

"It is fantastic to see the revival of travel that is underway," Francisco Pérez-Lozao Rüter, president of hospitality at Amadeus, said in a statement.

It is still early to tell precisely how much other factors, like the U.S. dropping its testing requirement, will goose up demand for hotels through the summer. But one thing keeping analysts optimistic is how forward-looking booking data already shows summer months pacing only 1% off 2019 levels when it comes to hotel reservations.

This doesn't mean the springtime outperformance of pre-pandemic occupancy levels will come to a screeching halt. Booking windows — or the number of days ahead of time travelers book a trip — remain shorter than normal. More than half of trips taken are still booked within a week of the travel, meaning hotel occupancy rates could soar even higher over the next three months.

"What we're telling hotels is the demand is there," Katie Moro, vice president of data partnerships and hospitality at Amadeus, said in an interview with TPG. "The booking [time] is still very short, and we encourage them to take advantage of that and make sure that they're priced appropriately for the demand that's coming into the market."

It won't be a surprise to anyone that hotel rates are expensive right now, and it isn't just limited to the U.S. Amadeus expects the global average hotel rate to soar from its $83 per night low in April of 2020 to an eventual $200 per night average over the summer — a jump from the $180 per night average seen over the same three months in 2019.

Things are particularly pricey in France, where average rates are expected to rise to $428 a night in July — a 29% increase from 2019 levels.

It may not be clear just how much impact reviving travel demand sectors will have on hotel occupancy rates, but it's abundantly clear that expensive hotel rates and airfare are a summer travel certainty.