Intriguing storylines from the Hotel Data Conference

Hotel Investment Today also talked to Jan Freitag, national director of Hospitality Analytics at CoStar, about his thoughts on the various hotel segments, why public companies and REITs are slashing their RevPAR forecasts for the rest of the year and the latest on leisure demand.

Here are some highlights we learned from various presentations at the Hotel Data Conference.

Wednesdays are the new Wednesdays

By Jan Freitag

Freitag explored how midweek demand, namely Wednesdays, was doing post-COVID for U.S. hotels. He said Wednesdays are an important way to measure demand during the week because, from 2010-19, Wednesday occupancy was higher (66%) for hotels for any day except for Friday (67.3%) and Saturday (69.4%). He mentioned a dramatic $32 ADR drop in 2020 for the industry, including an apocalyptic average occupancy rate of 9.7% for Wednesdays in April 2020.

Those numbers have dramatically risen since then, with Wednesday ADRs hitting $152 in 2023 and $155 in 2024. ADR growth on Wednesdays had a 6% increase from 2016-19, and after the dip in 2020, inflation has helped drive Wednesday ADR growth by 6% from 2022-23.

But Freitag said it’s clear from transient and group segmentation demand that hotels are still missing millions of travelers. Transient demand is still down 3% from 2019 to 2023, and group demand is down 8% from 2019 to 2023. So what it to blame? An easy culprit would be an incomplete rise in office attendance since 2019. He said that while office attendance is rising, it is still nearly half of where it was before COVID hit.

“It is very clear [that midweek demand] is recovering, and it’s recovered quite nicely, except we’re not back to pre-COVID levels of total number of transient rooms sold on the upper end,” Freitag said in an interview with Hotel Investment Today. “Why is that? I argue part of it is because we don’t need as many trips because we’re not all in the office all the time… my argument is that I think the transient piece is a little bit curtailed, but on the group side… every indicator seems to be that group is where it’s at. It’s what people want.”

Group trends and booking pace

By Chris Klauda, senior director at STR and Vail Ross, managing director of 2Synergize.

The presentation said that group demand has almost caught up with total demand, comparing pre-COVID numbers to where things stand now, but a larger ADR gap remains between transient and group in 2024 than where things stood at the start of COVID.

According to Simpleview Sales Quarterly data, aggregated lead volume has recovered from 2019 and is up from 2023. Aggregated lead room nights started the year strong and are nearly 31% higher than in 2019 and nearly 12% higher than a year ago.

Simpleview divided markets into four categories: large convention centers with 500,000 gross sq. ft, medium convention centers with 100,000-499,999 gross sq. ft., small convention centers with less than 100,000 gross sq. ft., and small markets with no major convention facility.

The data found that small markets were the fastest to recover from 2019 and also have a very positive outlook for the future, while the largest markets have the furthest to go in their recovery.

The presentation concluded that group demand continues to grow, with weekdays fully recovered to 2019 levels. Lead volume is up, but bookings are down compared to 2019. Still there is general optimism across the industry for the meetings and events business, with the smaller markets being the fastest to recover first.

Top 25 renaissance: Are CBDs driving growth?

By Colin Sherman, director of hospitality analytics, U.S. South for CoStar

The presentation found that in top 25 markets, RevPAR grew faster than all other markets. That trend was slightly less pronounced during COVID but is now back to pre-2019 gaps. For the last 12 months, except in March, RevPAR in the top 25 markets grew faster than in other markets.

The top 25 market Central Business Districts (CBDs), compared to their submarket counterparts, have 30% of the supply but 37% of the revenue. In May, RevPAR in the Top 25 CBDs rose 7% year over year compared to a 5% increase in the Top 25 submarkets. Occupancy increased in both categories by 3% year over year, and ADR increased by 2%.

However, the presentation said submarkets are pulling their weight and adding to performance in their markets, especially in transient occupancy, where submarkets lead their CBD counterparts.

What’s in the pipeline?

By M. Brian Riley, senior research analyst at STR

The presentation said that construction is coming back, but it’s still a slow return with a surge of development plans ahead. There is still a “wait and see” aspect to the hotel construction pipeline, with the lowest construction spending in almost 10 years, with the biggest barriers being affordable financing and constantly increasing costs for goods as many are waiting for inflation and interest rates to come down.

Because of those trends, the biggest activity surge right now is hotel conversions over new construction.

There isn’t much new room supply growth (+0.6% through June), but pipeline activity is up to over 758,000 rooms in the U.S., up 15.6% from 2019 and 19.7% from 2023. Most of that growth is in the 334,000 rooms in the planning stage, which is up 38.7% year over year.

While the 158,000 rooms currently under construction is up 5.5% year over year (with New York City, Nashville, Detroit, Miami and Phoenix leading the rankings), the presentation said construction spending is on par with September 2014 but is trending down from September of last year.

The presentation also said more hotels have converted from one company to another over the past few years (but are way off their peaks in the early 2010s), while branded to independent conversions are lower than 10-15 years ago. It also said that over the last two years, hotels were just as likely to move up a chain scale as they were to move down, and lower-tier chain scales are still leading in conversion activity.