What CoStar’s data tells us about the hotel industry

How has the travel industry changed for hotel mangers since 2019? At our Click. event in Miami earlier this year, Jan D. Freitag, National Director of Hospitality Analytics at CoStar, walked us through some of his most interesting data trends. He translated the figures into insights and shared his predictions for the rest of 2023 and beyond.

Read on to discover how he sees the next couple of years unfolding for the hotel industry, and watch the full session here.

Recovery from the pandemic is slow but steady

First of all, you’ll be pleased to hear the leisure traveler is officially back and exploring the world. CoStar’s US-focused data shows that although weekday traveler numbers aren’t quite where they were in 2019 just yet, weekend Average Daily Rate (ADR) growth is strong.

Meanwhile, major markets across the globe are seeing healthy occupancy levels. And, with the exception of mainland China, everywhere has strong rate growth when indexed against 2019 figures.
CoStar’s data also clearly showed that luxury hotels in the US are doing just fine, with 6% RevPAR percentage change since 2019. Resort and small-town hotels are also achieving the strongest RevPAR percentage change within the same timeframe – both at 20%.

“Shoulder days” are finally having their moment

With working from home so widely adopted, employees are ultimately realizing the perks of working from hotels, creating an ever-growing lucrative “bleisure” market. We’re seeing a strong trend where travelers are opting to mix business with pleasure, arriving earlier and/or leaving later, making shoulder days Thursday and Sunday far more popular. As the Wall Street Journal puts it, the future of business travel could resemble a mullet – business in the front, party in the back!

The numbers are good, but other factors should be considered

“In Europe, room rates today are 22% higher than they were in 2019,” Freitag shared. Similarly, in North America, they’re a healthy 18% higher. For weekend travel, there’s a lot of pricing power, and the data demonstrates this. However, Freitag warned that this growth may slow down if the corporate weekday traveler demand doesn’t pick up.

Providing greater context to the figures, Freitag also explained how inflation is likely to affect returns, “In other words, yes, room rate growth is here, and that’s great, but inflation is here too. And inflation eats up a lot of the room rate growth that we are observing.” Essentially, CoStar’s data suggests we won’t get back to 2019 real RevPAR levels until 2024.

Upper upscale hotels in urban areas are still struggling

The return to office demand is still the great unknown. Freitag’s frank answer to “How will corporate transient demand grow?” was simply, “I have no idea.” He went on to explain, “In my opinion, this is the defining question of the hotel industry for this year and probably next year.” There’s a clear relationship between people returning to the office and their partners visiting them in their downtown locations, which drives hotel demand. But the return to office trends are still murky at best.

Right now, CoStar’s data shows how this lack of corporate transient travelers is hitting upper upscale hotels in urban areas the hardest, with a RevPAR percentage change of -4% and -7% respectively when compared with 2019. Airport hotels have also felt it with a -1% change in the US when comparing 2019 figures with 2022’s.

Group demand will continue to be a success story

While upper upscale hotels are feeling the strain of hybrid work, this culture shift has also had a positive impact across the industry. With fewer chances to bump into coworkers in the office, companies are focused on retaining their culture with more team trips and conferences. They want to make their more infrequent get-togethers more significant occasions, and hotels are set to reap the benefits. Can group growth continue? “We’re betting on it,” Freitag confidently concludes.