STR‘s Hotel Data Conference held recently, provided great insights to the hotel industry’s recovery.
Tourism Economics president Adam Sacks focused on growing traveler optimism. While only about 55 percent of travelers in the U.S. say that they feel safe traveling outside their community, “that this number is rising,” he said. The improving employment situation is another reason for hope. Low interest rates have brought mortgage rates to “near historic lows,” Sacks continued, which is fueling a boom in the housing and construction markets. “It, of course, also lowers the cost of debt for households, increasing disposable income for things like travel [and decreasing] the cost of capital for businesses … A low interest rate environment is wind in the sails of the U.S. economy,” he said.
Demand for Mexico and the Caribbean
Vail Ross, SVP of global business development & marketing at STR, examined demand trends from 2020 and weekly and daily statistics the industry has seen so far in 2021 as it relates to hotel demand in North America.
“Demand growth has been a struggle across all of the regions,” she said, noting that closed borders between the U.S. and Canada have stymied travel as much as the drop in group travel has. In the U.S., demand was already starting to slow down “slightly” before the pandemic, Ross noted, but demand leveled out in the summer months of 2020 before declining again in the winter. Demand for Mexico has come back since that border remains open, but it is still down almost 57 percent for the region. Shifting travel restrictions for the Caribbean, meanwhile, have led to demand uncertainties. “We can see this impacting the average daily rate as well in these areas,” Ross noted.
The loss of group demand has forced a number of upscale business-focused hotels to close, she added, and while there is no guaranteed return date for group demand, Ross said her team is hearing more about group business bookings from clients. Midscale and select-service hotels have some of the best demand, and average daily rate for major metro market hotels is nearing $100.
In examining performance data for the year, Ali Hoyt, senior director of consulting and analytics at STR, found five bright spots among all the gloom.
The first was the way hotels in certain markets were able to hold steady throughout the downturn, with nearly half of hotels in interstate and small metro locations just about 70 percent or greater compared to their 2019 revenue per available room performance.
The second bright spot is the number of top-performing submarkets, with the Louisiana submarket achieving 102 percent of its 2019 performance in 2020 — but that could be credited to the impact of Hurricane Laura, so the team looked to see what submarkets performed best without a natural disaster. In Michigan, the Upper Peninsula submarket performed at 90 percent of its 2019 revenue per available room performance in 2020. “What stood out was Pictured Rocks National Lakeshore,” Hoyt said. The national park reached a new record for visitation last year at 1.2 million visitors, 40 percent over 2019.
The third was leisure weekend demand, which made Yellowstone National Park the second-busiest national park in 2020 — a title normally held by the Grand Canyon National Park, but park closures and travel restrictions lowered occupancy at that landmark. Weekend occupancy from July through September was above 70 percent for Yellowstone.
The fourth bright spot is luxury rates. While many luxury hotels were forced to close due to a significant drop in group business, some have been able to hold on to their rate with transient travelers, Hoyt said. Luxury properties in Scottsdale, AZ that stayed open throughout the pandemic were able to increase rate 11.4 percent in 2020. With transient business accounting for 70 percent of the demand over the summer, the hotels increased their rates nearly 20 percent over those few months.
The fifth bright spot is the pipeline. The number of rooms under construction traditionally declines during economic downturns, and while the region is seeing an increase in deferred and abandoned projects, Hoyt argued that this could help hotels in markets with limited supply.
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Originally Appeared On: https://www.travelagentcentral.com/hotels/recovering-economy-driving-demand