The hospitality industry has come back from past recessions, as well as crises of all kinds – economic, political, environmental, health and terrorist. Performance data shows the industry is recovering from the biggest crisis it has ever faced: the global COVID-19 pandemic.
But this recovery, like any recovery, will not be complete without the return of three categories of guests: leisure, business and groups.
With consumers keen to rediscover the world amid bottlenecks and restrictions, demand from leisure travelers has so far borne the lion’s share of the burden of this recovery.
“After a slow start until 2021, increased vaccine availability and the spring break season reignited hotel recovery in the United States at the end of March and led to a boom in leisure demand over the course of summer, which pushed occupancy to over 90% of 2019 levels. ”said Kelsey Fenerty, senior analyst at hotel analysis firm CoStar. STR.
“This pent-up demand combined with staff shortages in the industry and rising inflation have helped push the average daily rate to record levels by July,” she said. “Recreation demand remained strong even into late summer, with Thanksgiving 2021 being our best Thanksgiving week performance on record.”
While encouraged by this surge in leisure bookings, hotel executives, forecasters, analysts and investors are anxiously watching the other two segments of the pie for signs of renewed life.
“Performance indices softened somewhat, as demand segments of companies and slow-returning groups improved slightly during the third quarter conference season, but not enough to offset the seasonal slowdown in the market. demand for recreation, ”Fenerty said.
She added that while leisure demand for hotels has essentially returned to pre-pandemic levels, “demand from businesses and groups has only returned to 60% to 80%, so that’s where we need to see improvement for full recovery ”.
For the 28 days ending Dec. 4, the group’s demand for US luxury and upscale hotels was 70.8% of what it was during the same period in 2019, according to data from STR .
“Part of this came from an unusually strong thanksgiving holiday week – the index was 87%, which looks more impressive than it is because demand from the group is dropping a lot that week, ”Fenerty said.
For the week ending Dec. 4, the group’s demand indexed at 61.8% of 2019 levels, which Fenerty said “is probably more indicative of the actual picture of the group’s recovery.”
Isaac Collazo, vice president of analysis at STR, said, according to his estimate, that the drop in business travel represented a drop of about 20 percentage points in the occupancy rate of the US hotel industry in average in 2021, excluding New Years week and throughout the week. of December 11.
This means that when the hotel occupancy rate in the United States averages 57%, it could have been 77% had business travel demand fully returned to pre-pandemic levels.
This analysis is based on a sample of 3,651 hotels in the top 25 markets under brands popular with business travelers. The hotels in the sample represent approximately 37% of all US hotels that report data to STR and 39% of hotels in the 25 largest markets. The sample does not include group hotels, which are tracked as their own category.
“This group (…) can be characterized as the preferred hotels for business travelers. These hotels are mostly mid-sized, young and middle-aged and comprised of upscale and mid-range chains,” Collazo said.
In comments on the quarterly results, hotel executives have talked a lot about the pace, expectations and fulfillment of business and group demand, and those projections have evolved over the year.
In February, Chris Nassetta, President and CEO of Hilton, said that although transitory and group commercial demand “remains quite low”, both segments “showed modest sequential improvement” in Q4 2020.
Nassetta acknowledged that the group’s business takes a longer time to come back – usually because it is driven by larger groups that require longer lead times and planning – “but the trend lines are good,” he said. -he declares.
First Quarter Performance Announcement, Marriott International Executive Vice President and CFO Leeny Oberg said in May that demand was particularly high for the company’s hotels in resort destinations in the United States and Canada, but “we believe passengers and the group will continue. to improve slowly for now, then business demand could really accelerate in the fall as more businesses reopen with transient business returns faster than the group, given the time frame typically required to book group affairs.
Second quarter results for Wyndham Hotels & Resorts indicated a trend towards longer bookings on weekends, “with Sunday and Thursday nights now rivaling Friday and Saturday nights in terms of improving occupancy,” the president said and CEO Geoff Ballotti, adding that it allows hotel owners to push rates up beyond 2019 levels.
Demand for hotels in the top 25 US markets is also indicative of the strength of business travel. In the third quarter, the results of the hotel investment fund Host Hotels & Resorts saw significant improvement in bookings at its New York, New Orleans, San Francisco and Chicago hotels, President and CEO James Risoleo said in August.
The third quarter of 2021 has been the most encouraging from a business demand perspective.
“Discretionary business travel, group bookings and international travel have … Keith Barr, CEO of IHG Hotels & Resorts, said in October.
Marriott CEO Tony Capuano said in November that “although primary markets are still the most difficult, these markets recorded the largest RevPAR gains in the quarter as demand in gateway cities like New York continued to increase,” he said. he declares.
He added: “Corporate special bookings are currently down less than 40% compared to the same period in 2019.”
The leaders of RLJ Lodging Trust were “happy to see our company’s transitional revenues improve. 44% since last quarter, driven by markets like Atlanta, [Los Angeles] and Boston, ”said President and CEO Leslie Hale.
Hotel REIT Park Hotels & Resorts bets on the rebound in demand from companies and groups in markets such as New York, Chicago and San Francisco, according to President and CEO Thomas Baltimore Jr.
“I’ve been to New York three times in the past two weeks, and the city is coming back to life, and it’s great to see,” he said in November.
In Chicago, the pace of corporate group bookings at Park hotels was about 83% of 2019 levels in the third quarter, representing about 168,000 room nights citywide.
“We are very encouraged. Chicago has held up much better [than expected] since we reopened in June of this year, ”Baltimore said.
Editor’s Note: Chris Nassetta sits on the CoStar Group Board of Directors.
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