Travelers aren't pulling back from hotel spending in broad terms, said the world's largest hotel group. Plus, more highlights from this week's news in hotel deals and development worldwide.
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JP Morgan‘s research analysts reported on management meetings held with Marriott International. The management team said it sees an ongoing pattern of more business travelers adding leisure days to their trips than they did before the pandemic. Management also sees group travel buyers adding incremental demand as large events boom, while large corporates are somewhat reducing short-duration travel.
While Marriott notes visibility is limited because many bookings are refundable and not made far out, so far there has been no sensitivity on price with travel buyers. Marriott believes there remains an opportunity to push the average daily rate outside of the higher-end luxury segment where the average rate is already ahead of 2019 levels on an inflation-adjusted basis.
The world’s largest hotelier sees a potential recession as more constructive for its average daily rate relative to historical recessions. In other words, Marriott is in a better place to handle a recession than it was in the past, according to its management. Some reasons included that branded operators now represent higher market shares and operate with more sophisticated revenue management systems. If the leisure consumer becomes more sensitive to price, Marriott would look to maintain its average daily rate and incentive demand through other channels, such as by offering perks like free parking.
U.S. Hotel Prices Aren’t Wildly High
Consumers are griping about rising hotel rates, but the price spikespikes are only notable in selected markets, such as New York City. From the perspective of hoteliers, higher rates aren’t beneficial if rising operational costs eat the gains. If you look at inflation-adjusted figures, U.S. hotels aren’t yet back to 2019 levels.
Truist reported on a conference call they held with CoStar’s STR, the leader in hotel performance benchmarking. STR said 2023 and 2024 revenue per available room growth should be 5%, with inflationary cost pressures such as labor eating at least two points of the growth. CoStar is forecasting in 2023 the real average daily rate to be at 100.9% of 2019 levels, while up 117.4% in the nominal average daily rate.
CoStar’s STR expects occupancy levels to remain below 2019 levels through 2025, which is perhaps worse than a majority of the predictions at the height of the pandemic. The trend may partly be a function of the high rates, though the analysts don’t delve into this. There’s a notable decline in occupancy particularly evident for midscale and economy hotels facings tougher year-on-year demand comparisons. Resort room rate growth turned negative in March, and STR is seeing signs of higher-end travelers starting to switch to substitutions including cruising and many international destinations given the strength of the US dollar and the world reopening.
Taylor Swift and Beyoncé Help Fill Hotel Rooms
According to Choose Chicago, the city’s official tourism and marketing organization, last weekend in Chicago broke hotel occupancy records, thanks to a handful of downtown events including sold-out Taylor Swift and Beyoncé concerts. More than 44,000 hotel rooms were occupied over the course of Friday, Saturday and Sunday during a T Swift concert stretch, accounting for more than $39 million in total hotel revenue. Summer events in the city aren’t set to slow down anytime soon with more than 60 big-name concerts set to come to venues across the city. Fortune magazine reported that Swift’s two Las Vegas concerts in March restored the city to pre-pandemic levels of tourism.
Margaritaville Resort Debuts in Texas
Highline Hospitality Partners announced the debut of the Margaritaville Beach Resort South Padre Island, Texas, managed by Aimbridge Hospitality. The newly opened property is the first and only Texas beachfront resort in the Margaritaville portfolio, and its opening completes the $30 million transformation of the Pearl Hotel South Padre Island. The modernized resort and conference center features 200 guestrooms, 50 beachfront condos and 8,000 square feet of indoor and outdoor meeting space. For more context, read Skift’s story: “The Margaritaville CEO on Just How Far the Jimmy Buffett Brand Can Go.”
Thailand’s Hotel Recovery Is Choppy
The Thai Hotels Association (THA) said hotel occupancy rates in Thailand plunged to below 50% during May to June, an immediate fallout of the termination of the government’s “Let Us Travel Together” phase 5 campaign in April, reported The Nation. The THA predicts less than 50% occupancy rates for June after experiencing a full-scale slowdown in both domestic and international demand. This is the low season for Thailand and international tourists so the timing to terminate the campaign is a bit strange.
Chiang Mai’s tourism industry is continuing to recover as the local chapter of the Thai Hotels Association said the average occupancy rate of hotels in the northern province were sitting with a comfortable 70% occupancy rate from January to March. Those numbers plummeted in April to less than 30% as Chiang Mai, like other northern provinces, battled smog. The TAT estimates Chiang Mai will secure at least 80 billion baht of tourism revenue this year, approaching the pre-Covid level of 100 billion baht recorded in 2019.
Malaysia Opens a Karl Lagerfeld Hotel
Sheng Tai International Sdn Bhd has revealed the Karl Lagerfeld Tower, featuring the first Karl Lagerfeld hotel in Southeast Asia, reported the New Straits Times. It’s the first of its kind in Malaysia. The Tower is situated inside The Sail Melaka’ in the Melaka Waterfront Economic Zone in Kota Laksamana and consists of a hotel and branded residences. The Sail has nine towers for business, hotels, entertainment, and leisure.
U.S. and Mexico Are Driving Japanese Hotel Demand
The Japan National Tourism Organization announced that American visitor arrivals to Japan increased by 3.6% in the first four months of 2023 over the same January – April period in 2019. In the month of April alone, nearly 184,000 Americans visited Japan, up 8% over April 2019. That makes the US the only Western nation, aside from Mexico, to experience a rise in tourism to Japan. Mexico saw a 13.1% increase in its visitor numbers to Japan over the same period.
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