Hotels Benefited Despite Travel Disruptions

• Lower domestic hotel demand represented a seasonal decline, still above other periods

• Occupancy rates and average daily rates hit records amidst travel disruptions

• Tailwinds include a sustained rise in corporate demand, especially in groups

While lower domestic hotel demand represented a seasonal decline, it performed above other periods (-6% MoM/ 2% YoY/ 3% YoY3). Hotel revenues (-5% MoM/ 11% YoY/ 19% YoY3) followed a similar pattern but were supported by higher average daily rates (ADR). Guests accepted more expensive rates (2% MoM/ 9% YoY/ 14% YoY3) amidst the massive winter storm that derailed travel plans and increased flight cancellations. Occupancy rates on Christmas Eve registered a record, and airport hotels in areas hit the hardest by the disruption benefited the most.

 

Supply, i.e., rooms for sale, grew (3% MoM/ 1% YoY/ 4% YoY3). Highlighting the challenges faced by the industry, the number of hotel employees remained flat and below pre-pandemic levels (0% MoM/ 12% YoY/ -12% YoY3). Hotels operated with a lean staff and faced elevated labor costs, although there has been a deceleration in the pace of wage gains (0% MoM/ 4% YoY/ 26% YoY3). Tailwinds include a sustained rise in corporate demand, especially in groups, as convention calendars fill up. Yet to capture its pre-pandemic share, there is ample scope for further growth as business travel returns.

 

On the international front, Europe, which comprises almost one-third of the market, experienced similar trends. Asia Pacific, which includes China, constitutes a similar share, and started the gradual recovery from recently reopened parts. Middle East and Africa posted phenomenal results, spurred by the 2022 FIFA World Cup, a mega event hosted by Qatar. Although representative of a smaller share, occupancy rates lifted as football fans visited from all over the world, and combined with higher ADR, it nearly doubled revenues in the region.