Performance during the Christmas season raises the expectations of hotel operators

Hotel operators and management companies received an unexpected gift this past holiday season from U.S. vacationers who booked more rooms at higher prices than at this time of year before the pandemic.

“We love the leisure traveler these days because that’s what really drives them,” said Mark Hemmer, president of Vancouver, Washington-based hotel management company Vesta Hospitality, of the performance of his company’s 17 hotels in 15 states.

Over the Christmas and New Year holidays, Vestas Hotels sold almost twice as many rooms as last year at an average daily rate that was between 25 and 75% higher, he said.

Compared to pre-pandemic performance in 2019, this was “a much more modest improvement,” said Hemmer, with the company’s portfolio utilization of 5 to 10 percentage points and an ADR premium of 10 to 30%.

On average, US hotels set a record for occupancy on Christmas Day, according to data from STR, CoStar’s hospitality analytics company.

“Hotels reported their highest Christmas occupancy since 2015 in 2021, but it was the day of the week – Saturday – that contributed to the historically poorly documented holidays claiming this crown,” said senior STR analyst Kelsey Fenerty on the day of the week with the highest occupancy , and Christmas Day is usually one of the busiest days of the year. ”

Prices are a different – and better – story for US hotels over the holidays, especially New Years Eve, Fenerty said.

For New Years Eve and the week ending January 1, 2022, “ADR was the star of the show,” she said. “US hotels reported the highest weekly ADR ever [$157.91], an increase of 20.7% over the same week in 2019. “

Much of this price hike was due to the renewed price strength of high-end hotels in resorts, she said.

“Upscale hotels, which struggled the hardest due to their reliance on group demand as the pandemic progressed, stood out this week with ADRs nearly 25% above 2019 levels, suggesting that pricing power for transient demand is great.” is strong. ”She said.

For hotel operators, success means “always comparing with what one imagines,” said Hemmer. “Let’s face it, during the whole COVID thing for the past two years you don’t know what to expect. You have to be light on your feet these days knowing you are not always in control said we found the achievement extraordinary on both holidays. ”

Although the pandemic and the recovery of the hotel industry are still very uncertain, he said the strong holiday performance is throwing the coming year in a slightly brighter light.

“When we were drawing up our budgets for 2022, back in September-October, the big question was, ‘Will recreational traffic continue at the same pace?’” He said. “We hedged our bets a bit. We thought the demand would still be strong but maybe the rate wouldn’t be as robust. We are thrilled with what we saw in December, but none of us know what will happen will.” . We pay attention, and our teams pay attention. If something changes, we just try to put ourselves in a good position after hotel and market to react. “

For 2022, questions remain as to how business and group travel will recover from the pandemic.

Jason LaBarge, senior vice president of Birmingham, Alabama-based hotel management company HP Hotels, said smaller groups – particularly social, military, educational, religious, and fraternal groups, also known as SMERF groups – are booking businesses at the pre-pandemic level Bookings for his company’s portfolio of more than 40 hotels in 17 states “are still likely to be 15-20% below pre-pandemic levels”.

“The markets that have been challenged the most are urban markets. From a company perspective, this has not recovered as much as we would like. We had a couple of big specials, sporting events, and small conferences returning in the third and fourth quarters, ”LaBarge said.

“That will keep improving,” he said, adding that in markets like Charlotte, North Carolina, the corporate travel segment is more regional.

“Wells Fargo in particular expects 50,000 travelers to enter the Charlotte market in 2022,” he added.

LaBarge writes the success of his company’s hotels over the holidays – when occupancy increased by up to 86% in 2020 and 20% compared to 2019 and prices significantly exceeded the two previous two years – with “focus on where the business “lies to came.”

“When corporate business collapsed, we looked at construction and social groups and some of the sports groups that were still traveling,” he said.

As of early 2021, HP Hotels’ portfolio was performing around 40 to 50% below pre-pandemic levels, he said.

“As the year went on, the void closed, and we were 15% behind by the third quarter and early fourth quarter [2019]”Said LaBarge. “We expected to end the year out there. To see that these two holidays really exceeded those expectations was fantastic. It wasn’t to be expected, but neither am I particularly surprised given the demand and discussions with colleagues, friends and family in different markets. ”

Hemmer said business travel is “a little rested” in some of the markets his company operates hotels in, but “for the most part, business travelers are just not there to love them.”

“It’s just nowhere near the level we need in or near 2019,” he said. “We have a couple of group hotels and it was really a hit or miss. We were ready to get back on our feet in the fourth quarter.” [of 2021], excited to have business on the books, but then we had a COVID resurgence and started tackling cancellations and postponements. We can book it all day, that doesn’t mean it will show up. It’s kind of insane and forces us to change our focus. If you’ve booked the group, you’d better book others too, because you can’t trust them. ”

The company is trying to discourage groups from canceling, but as the calendar fills up for 2022, flexibility to reschedule this year is running out.

“We want them to just postpone and reschedule it,” he said.

Fortunately, there are plenty of group bookings for dates in 2022, Hemmer said.

“There are a few gaps in the calendar at our largest congress hotel for groups, but the year is 90% full,” he said. “We will not record anything else, but while we are trying to make a new appointment, we have moved very successfully to the available appointments. The groups were very flexible and worked well with us. But it’s going to be harder in the future because we just don’t have options. ”

LaBarge said HP’s hotels were also successful in rescheduling groups that called for cancellation over concerns about rising COVID-19 cases.

“We had several small social groups in early January that were canceled due to the COVID variant, but to be honest, as many as we canceled, we also had replacement bookings; and groups didn’t cancel long-term. We moved.” most on the following months – February and March, ”he said.

“The fourth quarter has been very encouraging,” he added. “We expect growth to continue, demand to rise and pick up on the dynamics of 2021.”

HP had previously planned a performance decrease of 10% compared to 2019 for 2022. Now, LaBarge expects second-quarter performance to be within 5% of pre-pandemic numbers, “and back to 2019 levels by the third quarter”. was. “

Cory Chambers, senior vice president of Hospitality Ventures Management Group based in Atlanta, Georgia, said via email that the company’s portfolio of 50+ hotels has also “exceeded overall projected and budgeted expectations” over the holidays from hotels in warm countries. Weather destinations and some city markets, while suburban and tertiary markets fell short of expectations.

“Revenue growth was balanced between occupancy and ADR, which was a positive trend as occupancy lags before and after the holidays,” he said.

Despite the strong holiday performance, Chambers said, the company expects the recovery to “slow somewhat” in the first quarter due to temporary slight business performance and group demand trends as a result of the current state of the pandemic. He added that HVMG made group cancellations in the first quarter after that segment began to show strong signs of recovery.

Jennifer Driscoll, vice president of revenue management for Germantown, Tennessee-based McNeill Hotel Company, which has 27 hotels in its US portfolio, said via email that the company expects a stronger holiday season and “immediately after Labor Day began planning for the additional demand “. . ”

“Looking back over the years 2019 and 2020, we clearly exceeded these years not only in terms of occupancy at Christmas, but also in terms of ADR. For the McNeill portfolio, our occupancy was 24% higher than in 2019, and our ADR was almost 20 While we were relatively flat on New Year’s Eve compared to the previous year, we were able to increase the ADR significantly in 2019 and 2020, he said.

She added that the company remains optimistic about performance in 2022, closely monitoring segment and market trends, particularly “demand from individual business travelers, small meetings … and leisure”.

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