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Moody releases more positive forecast

Moody’s has just revised its outlook for the global hospitality industry from stable to positive, reflecting its expectations for a consumer comeback that is big but uneven over the next 12-18 months.

Here is Moody’s inaugural outlook for its hospitality group, which encompasses gaming, restaurants, lodging and cruise.

Hospitality recovery will be strong, uneven and potentially short-lived. As the pandemic starts to ease, we expect that consumer demand for leisure activities will be so strong that it will drive global hospitality EBITDA up 40% to 45% over the next few months before easing back as conditions normalize. However, the recovery duration and path will differ across the hospitality sectors and regions.

U.S. restaurants put recovery back on menu. We expect restaurant EBITDA to surge 20% to 25% over the next 12 to 18 months after plunging more than 35% in 2020. We expect sales and operating profit will keep improving, although the trend will likely not be linear. The comeback from such lows will generate outsized percentage gains as the next several months lap the depth of the pandemic and restaurant restrictions.

Lodging comeback will be driven by leisure travel. The U.S. will lead the recovery in lodging as travel demand in Europe and other parts of the world lags due to stricter and more protracted travel restrictions. U.S. booking trends indicate that summer leisure travel in the U.S. could look very similar to 2019 levels, or stronger, which will help leisure-focused hotel companies.

Global gaming recovery will be led by U.S. regionals. The reopening of casinos is spurring an industry rebound, albeit unevenly across regions. U.S. regional casino operators are leading the way, similar to Asia Pacific. In Europe, prolonged restrictions and lockdowns have delayed recovery to the second half of 2021.

Cruise ships will likely relaunch in second half of year. We expect cruise ships to hoist their sails again in the second half of the year, putting them on the path for rebooting earnings in 2021. Over the past year, cruise companies have generated negative earnings and faced liquidity pressure as they carry operating costs for marooned fleets.

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