North American hotel occupancy is climbing and signs point to a resurgence in leisure travel demand, analysts revealed during the first-ever global edition of STR's Hotel Data Conference, which wrapped up its live virtual broadcast March 25.
"From an economic standpoint, we're very, very encouraged about the near-term prospects," said Adam Sacks, president of Tourism Economics. Over the past month and a half, he said, the percentage of households who plan to travel in the next six months has risen from the low 60s to 87 percent. "That is indeed pent-up demand," he described. "And I think that bodes very well for leisure travel recovery in the summer."
As Sacks went on to point out, though, corporate and group business is another story — and an important one on the road to meaningful recovery in the hospitality sector.
"The industry can't be built back just on the backs of leisure demand," said STR president Amanda Hite during the North American Forecast session. "And what we'll see this year is leisure. There is pent-up demand; people are waiting for vaccinations and ready to start traveling. That's really going to drive demand this summer — especially on the weekends, which is already occurring and we're going to see that continue."
As for group business, Hite said, we'll need to be more patient. "Group demand is what we need for us to really get back to where we were in 2019," she continued. "In the fourth quarter of 2021, we expect group demand to still be down 40 to 50 percent compared to the fourth quarter of 2019. So it will be 2022 before we start seeing the group demand really be able to help drive recovery for the industry."
Jess Petitt, vice president of analytics at Hilton and a panelist in the forecast session, agreed with the need to temper excitement and maintain a realistic perspective on the current surge. "I didn't think it was going to be nearly as good as it's been in the first part of this year," he said, referring to demand and occupancy that significantly outpaced expectations in February and the first part of March. "But we're talking about beating expectations that were low," he continued. "What really matters is the second half of this year; it's not just when we're dependent on leisure customers going to leisure destinations. Do we start to see those green shoots in demand that come to business transient markets, and do we start to see some initial signs of group business? There's a whole different set of expectations for the second half of the year that we have to keep an eye on and see if we can hit them."
Green Shoots for Groups
But even with meaningful group-business recovery still a ways off, hotel executives were at least cautiously optimistic about the signs they're seeing thus far. "We're starting to see an increase in events already, albeit very much hybrid-type events," said Hilton's Petitt. But he added that this is the kind of business they expected, and that the company's EventReady program was designed around accommodating hybrid events with a smaller in-person attendance.
Panelist Sheenal Patel, CEO of Arbor Lodging, pointed to similar green-shoot observations — beyond the weekend leisure business his properties are experiencing in a variety of markets. "We are now starting to see some group come back," he said, "in particular in government, health care and companies that service those particular industries."
What's interesting, Patel added, is that this isn't business the hotel management company was hosting before the pandemic. "It's a completely different segment than our typical market, consultants that would stay at our upscale extended stay hotels," he described. "But this business is coming back and it's coming back pretty strong — we just have to uncover it in different places. And it's our expectation that that kind of business is what's going to stabilize us through the summer and fall — because the weekends are already back to being fine."
The hoteliers speaking on the Executive Panel, the final session of the conference, conveyed similar observations. Eric Habermann, COO of the Pyramid Hotel Group, said that while his company's business demand is mostly leisure at this point, the pace of the rise in group activity is remarkable. "In February, we saw a 15 percent increase in new prospects for group compared to January, which was up 200 percent vs. December," he said. "The group that we're seeing right now is either going in the next 45 days or over the summer, but we are seeing some growth happening everywhere."
And Liam Brown, Marriott International's group president for the United States and Canada, was likewise encouraged by the interest Marriott is seeing thus far — a chunk of it being meetings that were originally slated for 2020. "For much of the group that we had cancelled in 2020 and '21, we have managed to rebook north of 83 percent in most of our big house hotels," he explained. "And we are seeing a big uptick in interest for group, in particular even business in the year, for the year. That's mostly smaller groups, for this year, but for bigger groups there's certainly a big manifestation of interest that's developing and we're very encouraged by the numbers."
In their forecast, STR and Tourism Economics don't expect the current leisure surge to have a marked effect on the speed of industry recovery. Given the anticipated slow comeback for business travel and meetings, STR is still projecting that the U.S. hospitality industry won't rebound to 2019 performance levels until 2024. The latest forecast (below), calculated demand based on the scenario that 60 percent of the U.S. population will have been vaccinated by June 2021 — with rising vaccination percentages thus far aligning closely with surging levels of traveler confidence.