US Hotels Continue Long, Slow Race Back To 'Normal'
Five Takeaways From April US Hotel Industry Performance Data
If March jump-started the U.S. recovery, April cemented the U.S. as a leader of the pack in the race back to a normal, post-COVID-19 world.
Just like in March, U.S. hotels in April recorded their best hospitality performance since the start of the pandemic. While occupancy continues to improve weekly and monthly, some concerns — such as the absent business and group travelers — remain at the top of hoteliers’ minds.
Vaccinations Matter
U.S. hotel performance continues to improve across class, size and location lines, underpinned by the vaccination rate. Vaccines are widely available to anyone ages 12 and up, and even as most of the rest of the world waits their turn, cities, counties and even companies across the U.S. are virtually bribing the population into getting the vaccine.
As vaccinations continue to climb, demand recovery as indexed to 2019 has stalled somewhat — a clear indication that even as leisure travelers hit the road, businesses remain somewhat warier of sending employees out into the world again.
Back on Familiar Territory
Nationally, leisure demand helped push the industry above another benchmark referenced quite a lot last year: The Great Recession.
The hospitality industry changed a lot over the past 12 years, but to see occupancy on level with prior downturns underscores how far the industry has already come: “Normal” may still be out of reach, but occupancy has moved into more familiar downturn territory and out of the terrifying, “unprecedented” 2020 times.
Class Comeback
For much of 2020, midscale and economy hotels performed significantly ahead of the other four classes. However, upper-midscale and upscale hotels have closed the gap in recent months, as evidenced by year-to-date occupancy.
Year-to-date 2020 occupancy includes two months of “normal” performance and two months of COVID-19 performance. Year-to-date 2021 occupancy splits similarly, with two months of COVID-19 performance and two months of “recovery” performance.
The four classes able to grab those transient leisure travelers have outpaced their 2020 year-to-date occupancy, with even the weaker occupancies of January and February outpacing March and April last year, and skyrocketing weekend demand over March and April 2021 pushing 2021 year-to-date occupancy to or above the 50% mark.
The problem for luxury and upper-upscale hotels is that even if they drive just as much or more leisure demand as they did last year, there is still a huge deficit. With the road warriors still at home and conferences taking place over Zoom, even two “strong” recovery months can’t compensate for two normal months in 2020.
Segmentation Struggles
Group demand for hotels isn’t zero, but it’s pretty close. Year to date, U.S. hotels have sold an average of 56,000 group rooms per night, compared to 246,000 group rooms per night in 2019. Group demand has started to show some signs of life this year but compared to the meteoric rise in transient demand that started in January, it’s still relatively weak.
It’s not all doom and gloom. Group demand has increased each month so far this year, and this month surpassed 2 million room nights sold for the first time since March 2020.
However, luxury and upper-upscale hotel closures make a lot more sense viewed in this light.
It all breaks down to a vaccinated population: No company wants to make the news for hosting a superspreader event, forcing employees to travel before they feel safe or violating CDC guidelines. In addition, while we are starting to see widespread rollbacks of COVID-19 restrictions, capacity limits are in effect in some regions.
The good news is that right now, CEOs and event planners are likely reviewing plans for the fall. Tourism Economics predicts restrictions will finally begin to ease enough in the third quarter to allow groups to return. Still, the bigger the event, the longer lead time it will need, which means there will be a lag between scheduling and hosting an event.
Markets
Leisure demand dominance is prevalent among the top 25 markets as well, with Tampa, Miami, and Phoenix leading the nation’s biggest markets in hotel occupancy this month.
Compared to the U.S. as a whole, the top 25 markets are still trailing, because travelers are still choosing rural and outdoor markets over urban and city-center markets.
Whether or not the pandemic heralds a longer-term shift in traveler preferences remains to be seen, but the markets that have done and continue to do well — such as Gatlinburg, Wyoming, and the Florida Keys — are the ones to keep an eye on, as demand may start to shift as life returns to more normal patterns.
April marked another record-setting month as the U.S. hospitality industry continues to slowly climb out of the COVID-19 abyss, and weekly data suggests that May is just as strong as April. With travel patterns shifting back into more normal trends, the coming weeks and months will prove vital to industry recovery.
Kelsey Fenerty is a research analyst at STR.
This article represents an interpretation of data collected by STR, CoStar's hospitality analytics firm. Please feel free to comment or contact an editor with any questions or concerns.
About STR
STR provides premium data benchmarking, analytics and marketplace insights for the global hospitality industry. Founded in 1985, STR maintains a presence in 15 countries with a corporate North American headquarters in Hendersonville, Tennessee, an international headquarters in London, and an Asia Pacific headquarters in Singapore. STR was acquired in October 2019 by CoStar Group, Inc. (NASDAQ: CSGP), the leading provider of commercial real estate information, analytics and online marketplaces. For more information, please visit str.com and costargroup.com.
