Book Now or Pay Later: US Hotel Rates Hit an All-Time High
If spring break serves as a canary in the coal mine of what to expect for the upcoming travel season, the results are clear: prepare to pay big bucks for a hotel stay in the US
The United States continues to outperform China and Europe in revenue per available room, the hotel industry’s go-to performance metric. At the start of the month, US hotels were 8% above 2019 levels, while European hotels were down 24% and Chinese hotels were down 63%.
The weaker performance figures were due to shutdowns in Shanghai amid a surge of new coronavirus cases, while the war in Ukraine affected European hotel performance.
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In the United States, the number that hotel owners are likely to brag about is the one that has the most impact on travelers: the average daily rate charged for a hotel room.
Last month, the average daily rate for a hotel room in the United States was $146.61 – the highest average daily room rate for any month on record, according to the hotel data company STR. When adjusted for inflation, it is only about 2% below 2019 levels.
This is a major win for hotel owners who want to recover as quickly as possible from the decimated performance levels seen during the pandemic. It’s also a reminder to book as soon as possible given the cost of travel this summer, especially to leisure destinations.
Average fares in Miami last month, for example, were $329.50, down from $252.80 in 2019, according to STR. In Tampa, the average room price has fallen from $173.90 in 2019 to $211.35 this year.
However, spring travel demand was not just coming from people taking vacations.
“Easter and Spring Break are just the two clear indicators of continued pricing power for the U.S. hospitality industry, driven by, as we’ve said many times before, very healthy leisure demand,” he said. said Jan Freitag, national director of hotel analytics for STR’s parent company, CoStar. . “We are now seeing a return of groups.”
Leisure travelers will find more competition for hotel rooms as the group travel industry — those who book hotels for meetings and events — shows signs of recovery. U.S. hotels sold a total of 6.6 million group nights in March. This is still below the 7.8 million seen in March 2019, but a sign that the recovery of another driver of hotel demand is underway.
The persistent gap between today’s and 2019’s demand levels for group booking activity likely stems from the larger type of events. Major corporate events and citywide conventions like the Consumer Electronics Show in Las Vegas are still not taking place with pre-pandemic attendance levels. Attendance at CES earlier this year was well below 2019 levels in light of the surge in the omicron variant.
“We’re getting closer now,” Freitag said. “This last million [group nights] what is missing is obviously the hardest [to build back].”
There is cause for optimism, as companies are still holding regional meetings and smaller board meetings, Freitag added. Spring and summer are also peak months for weddings, which fill hotels.
A disjointed global recovery
China and the United States, respectively, lead the world in terms of hotel recovery from the pandemic. Both countries have large populations that could support domestic hotels in leisure destinations even with closed international borders. The Middle East, led by Dubai in the United Arab Emirates, has recently taken a leading position in the recovery, as the region eased restrictions on international travel.
Even Europe, generally more dependent on international travelers to fill hotel rooms, began to accelerate its recovery towards the end of last year. European hotels have even slipped to second place in the “Big 3” hotel markets, as China’s strict lockdown measures in response to new virus outbreaks have caused hotel performance in that country to plummet.
Hotel executives are expected to focus on US performance in the upcoming earnings season given the volatility in Europe and China. Publicly traded hotel companies begin reporting their first quarter results later this week.
“Overall, the United States is leading. Especially the highest room rates, recreation is just gangbusters right now, as people are sure to find out when they try to book their spring break or their summer break or even their winter break. You better get on it now,” said Patrick Scholes, managing director of lodging and leisure research at Truist Securities. “[Hotel executives will] certainly point that out, and people will say they’re very encouraged by the pace of recovery for business travelers.
Midweek reports of the number of people passing through TSA security checkpoints at US airports in recent weeks show the gap is narrowing with pre-pandemic levels. It’s not scientific, but the number of passengers in the middle of the week generally indicates the number of business trips.
Business travel remains the demand sector with the biggest question mark, especially as companies are still figuring out what hybrid work-from-home schedules look like. Even a modest recovery in business travel on top of the already robust rebound in leisure and groups means one thing: the average hotel rate will only go up.