Executives at publicly traded hotel brand companies and real estate investment trusts noticed a shift in the health of business and group travel demand during the first quarter.
That demand environment more closely resembles 2019, many said.
Some companies, including Host Hotels & Resorts, Hilton and Hyatt Hotels Corp. are experiencing improved demand from small- and medium-sized enterprises. And group revenue pace for some has been above or just shy of 2019 levels.
For more highlights on business travel and group demand trends during the first three months of the year, read below.
“We are confident that the changes we are observing in leisure and business travel behavior, which favor our brands, will enable us to maximize growth opportunities well into the future.
“Despite the historically softer first quarter for leisure travel, our guests are extending their trips into shoulder days of the weekend. In fact, in the first quarter, we drove nearly 2 percentage points of occupancy growth on Thursdays and Sundays compared to 2019. The trend of leisure travel demand spreading more evenly throughout the months of the year and into weekend shoulder days benefits our brands and allows us to attract and capture an even larger share of an expanding leisure demand segment.
“We expect business travel in our key industry verticals such as transportation, logistics and construction to increase, driven by the significant reshoring of American manufacturing and infrastructure investments across the country. Industry experts estimate that these investments will generate between 50 [million] and 100 million room nights over the next decade. That’s great news for our brands, and in particular, our extended-stay segment. Likewise, we anticipate additional tailwinds from business travelers in sectors such as health care and financial and professional services, especially in the context of the Radisson Americas acquisition.”
“With group [business], for example, there’s actually been some benefit over the reality that groups are booking closer to the time of the actual event. I think we will eventually get back [to 2019 group demand levels]. We are getting fairly close. But I think the best part is that you’re seeing the fundamental business segments of business transient, leisure and group really all operating on full cylinders. Not exactly the way they behaved in 2019, but still really in good shape.”
“We haven’t seen any slowdown in the leisure segment. … Our downtown hotels have really seen business return in a material way. And not only business transient but leisure business.
“Group really is firing on all cylinders. Total group revenue pace is now up 2.5% to the same time in 2019.
“Recovery in [business transient] led by small- and medium-sized businesses, as well as increased rate being driven by special corporate [accounts].”
“We remain bullish on the future of travel. Travel is one of the most highly valued assets in our society and around the world. Leisure demand enjoyed a strong period of outperformance that began before the pandemic, and we see that secular trend of outperformance continuing in the coming years.
“On group, the funnel for future business looks very strong. On business travel, while there is still some uncertainty as to where demand ultimately settles out, there clearly has been positive momentum and we are primed to take share from other hotels because of our excellent locations and from repositioning.
“We’re seeing better than anticipated outside the room spend on banquet. The groups that have been coming over the last really six months, I would say, have generally surprised to the upside on their rental, what they’re doing for the events and the food items. There’s this general sense from the event planners that if they’re going to get people on the road and get them together, it needs to feel meaningful and have satisfied attendees. You really need to kind of roll out the carpet to make sure that they feel like it’s worth the effort given the tight labor market. We’ve been very pleased on that side.”
“Recovery in group [demand] remains robust with RevPAR finishing roughly in line with 2019, with steady improvement each month in the quarter and March exceeding 2019 by 5%. Demand for future bookings also remained strong with full-year group position up 28% year over year and 3% versus 2019. Additionally, new group leads ended in the quarter 13% higher than 2019, an increase of six points compared to the prior quarter.”
“Business transient also continued to improve with RevPAR up 4% from 2019, reflecting the resiliency of business travel, particularly for small- and medium-sized businesses, which remain roughly 85% of our segment mix.”
“The increasing return of business travel in groups demand has been notable in Europe as has the return of major events and expos in other markets such as Japan, Australia and India. Other destinations such as Thailand marked those that are only recently [seeing] the benefit of international travel resume.”
“We are getting a lot of demand from small- and medium-sized business transient [groups] versus the larger companies. And some of that comes in through retail, which is difficult to classify exactly as business transient. Some of the gap, one could argue, is being made up by selling more directly through retail as opposed to being classified business. In general, we still expect some improvement to occur, but probably plateauing until there is more macroeconomic certainty.”
“The groups are a bit lighter during the summer months than they are, say, deeper into the fall. But I would say on balance that it’s a pretty even outlook we have in terms of the way the pace is building.”
“Business transient had the strongest relative recovery, more than doubling last year’s first-quarter revenue and reaching approximately 85% of first quarter 2019 levels, with March reaching 92% of March 2019 levels. Large corporate accounts had the most recovery momentum in the quarter, while small and medium enterprises improved slightly, and we’re in the same approximate range as 2019 levels.”
“As we look out to 2024, we are encouraged by the momentum in some of our larger group markets, with 2024 portfolio-wide group revenue pace as of March 31, 2023, up 9% compared to the same time last year. Driven by strong convention and citywide activity expected for Chicago and New Orleans and healthy in-house group booking activity including at the Bonnet Creek complex in Orlando.
“Group pace looks good as we look out as well. But let’s not all kid ourselves here. There’s still a lot of uncertainty. We’ve got a lot of invariables here. As we’re getting at the peak of the tightening cycle, there’s still concerns about a potential credit crunch.”
“Group demand was also very strong in the quarter. In the U.S. and Canada, group revenue for full-year 2023 was pacing up 26% to 2022 at the end of the quarter, a significant improvement from group pace at the end of last year. For the second through fourth quarters of this year, group room nights were pacing up 9%, with rate up 7%, leading to revenues pacing up 16% year over year.”
“Turning to our pace for [second quarter] and the rest of the year, it looks pretty good. In [the second quarter] on a year-over-year basis, room nights on the books at the end of March were up 5.7%. Group rate was up 6.1%, and group revenues were up 12.1%. Total revenue pace for [the second quarter] versus last year, including group and transient, was up 4.9% with rate representing 2.1% growth. For the entire rest of the year, including the second quarter through fourth quarter, group room nights pace ahead of last year by a strong 10.3%. Group ADR is up by 8.7% and group revenue paces ahead by 20%.
“Factoring in group and transient and looking at the total pace for the remainder of the year, total room nights are up by 8%, ADR is ahead by 3.9%, and total revenues are up by 12.2%. [Second-quarter] year-over-year total room revenue pace is the weakest of the year. It improves in [the third quarter] and then further in [the fourth quarter]. This is encouraging considering the current concerns about an economic slowdown or recession later this year, which we certainly do not yet see in our pace for the rest of the year. However, we should all remember that in the hotel business, it’s good until it’s not, meaning it can turn very quickly and business on the books can cancel as well.”
“We’re also driving more group at our resort properties. That’s a different segmentation. And our group rates, by and large at our resorts, are actually lower than our transient rates. Not surprisingly, right?”
* Editor’s note: Chris Nassetta serves on the board of directors for Hotel News Now’s parent company, CoStar Group.
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