Jan Freitag is national director of Hospitality Analytics at CoStar CoStar exec on resiliency, return-to-office and ratesBy Rob Schneider | August 17, 2023Share Jan Freitag, national director of hospitality analytics for CoStar, discusses climate change’s impact on hospitality, when we can expect international inbound to return and the current relationship between mixtures and ADR. When asked about the issues people aren’t talking about right now that could significantly impact the hospitality market, Jan Freitag’s thoughts mirror two topics currently atop today’s headlines. “I think we’re not talking enough about climate change and the resiliency of the buildings,” Freitag, national director of hospitality analytics for CoStar, said. “I think resiliency needs to be part of the conversation as we design buildings… not just imposed by the insurance or the zoning codes, but just by common sense. I want this building to stand.” Freitag, who has been with New York-based CoStar since it acquired STR, also said the ever-present topic of labor’s impact isn’t going away. He mentioned the American Hotel & Lodging Association’s support for immigration reform and an H-2C non-immigration visa classification.“What if we get to just increase the workforce?” he said. “This is not a partisan issue. They’re saying this is not a border conversation. This is not an immigration conversation. It’s a labor conversation.” Jan FreitagHotel Investment Today spoke with Freitag at the Hotel Data Conference in Nashville about how a return-to-office is tied to traditional U.S. markets bouncing back, when international inbound could return and ‘the question of mixtures’ when discussing ADR trends.Hotel Investment Today (HIT): What’s your take on traditional hotel markets like New York, Boston and San Francisco coming back? How long before those markets come back to 2019 levels?Jan Freitag: In terms of normalization… the way I think about it is that the outperforming markets are normalizing back to growth rates that are normal because they were over-indexed…. and unperforming markets are also coming back to normal because their growth rates are not going to be that bad forever.Then the question is, when can those large urban markets come back to where they were? That hinges very much on return-to-office. The business traveler doesn’t travel for fun, right? They traveled to meet somebody in an office. But if that person isn’t in an office, they’re just going to do this on Teams or Zoom… The joke I always make is that if you’re sitting in the office on Park Avenue, I’m not going to fly to LaGuardia to meet with you in a kitchen in Hoboken. We’re just going to do this on an online platform.Transient is the wildcard and is the underperforming sector. And I don’t know, if we’re not in the office for five days or three or four days, how will that impact corporate transit? I think it will have a negative effect.HIT: What U.S. markets do you think will continue to overperform?Freitag: We need to think about two things: absolute values and the percent change. The absolute values on the room rate side for Miami, or Tampa or the (Florida) Keys: they’re going to continue to be really high, but we’re not going to continue to see 10% growth every year… So, absolute value-wise, we’re not going to go back to 2019.Transient is the wildcard and is the underperforming sector. And I don’t know, if we’re not in the office for five days or three or four days, how will that impact corporate transit? I think it will have a negative effect.Jan FreitagShare this quoteOn the occupancy side, do we see room demand more normalizing? Right now everyone is going abroad. And that’s going to wear off in 2024-2025… So, we did domestic when we were sequestered here because of COVID. And then everybody rushes to Rome... Maybe next time we’ll stay back here.HIT: How much can resort hotels expect to beat or hold recent performance moving forward?Freitag: On the percent change basis, it’s going to be very hard to do. But on the absolute room rate basis, I think they’re going to be able to continue to maintain, but maybe it slows a little bit… Arguably, it’s a question of mixtures [of hotel segments]. We just heard what Marriott said in the earnings call, ‘Hey, we see softness in luxury ADRs. But we are not seeing discounting.’So we’re seeing fewer people buying high-end resort rooms and more corporate transient buying luxury… And there’s a big delta. I’m making this up, like $2,000 versus $800. So, if I’m selling more of the $800 rooms year-over-year, my ADR is going down, but it has nothing to do with discounting and everything to do with the mixture.HIT: What is your take on the macros and their impact on the international inbound market? How fast is international going to come back?Freitag: We should probably talk about Europe. That has a lot to do with the exchange rate, and that airfare is very expensive… Hopefully, by next year, if the exchange rate normalizes, [traveling to] the U.S. will be a little bit more attractive, and hopefully, people will make that trip.I think as long as there’s war in Ukraine and the Russian air space is closed, it’s going to be very hard and almost impossible for the Chinese traveler to get here in meaningful numbers. Some will, but I’m not hopeful that that is going to come back [this year] and, honestly, next year, either.HIT: What do you see for the luxury and economy segments, which have been outperforming?Freitag: Chain data has been down for the last five months, ADRs have deteriorated, and room demand on the economy side has deteriorated… But I think the question is, will we see continued deterioration in the data? I think for luxury ADR, certainly, the answer is yes… And on the demand side for economy, I’m not sure anybody really knows.The theory is that the customer on the lower end of the spectrum was never a traveler, but was actually a resident. And they just picked extended-stay or economy-type accommodations to live in while they figured out their life. And now, as rents have gone down, they’ve switched back to a more permanent living situation… We’re seeing some leakage there from residents who were never really hotel customers returning to being residents… I’m still trying to dig into the data.