March 06, 2024

Hotel Executives Forecast Robust Group Demand

Citywide Events Calendars Strong in Boston and Washington, DC

Hotel demand across all segments experienced some variation of normalization in 2023. Demand from business and group travelers rallied toward pre-pandemic levels, while leisure demand remained steady or decreased a bit after a strong 2023.

Hotel brand executives said during fourth-quarter and full-year 2023 earnings calls that group demand is set up for another strong year, with several major cities such as Boston and Washington, D.C., touting impressive citywide convention calendars in 2024.

Here are some highlights from hotel company earnings calls on the demand outlook this year.

Jon Bortz, Chairman and CEO, Pebblebrook Hotel Trust

“We expect to experience a significant upside in our markets over a multi-year period that will be powered by little to no supply growth in our markets, while economic growth drives up travel demand. If we look back to the beginning of the last cycle ... total EBITDA for today's current portfolio doubled between 2010 and 2015.

"In this next cycle, we expect urban and resort supply will be more restricted and slower to be added than in the last cycle. We also believe demand will grow in a healthy and profitable way due to strong economic growth driven by significant technological and medical developments, a massive onshoring effort in various industries, growth coming from the green energy transition and positive secular trends related to travel.

"These positive fundamentals in totality coupled with a moderating inflation outlook and significant benefits from the completion of our strategic redevelopment program should lead to very strong bottom-line performance for us over an extended number of years. We just need to get over this macro hump.”

Tony Capuano, President and CEO, Marriott International

“In the fourth quarter, global RevPAR increased over 7% year over year, driven by roughly equal gains in the ADR and occupancy. Group, which comprised of 23% room nights, was again the standout customer set. Compared to the year-ago quarter, group revenues rose 9% globally and 7% in the U.S. and Canada.

“Group is shaping up to have another solid year in 2024. At the end of last year, full-year 2024 group revenues were pacing up nearly 13% globally and 11% in the U.S. and Canada on a year-over-year basis, driven by robust increases in both room nights and ADR. Leisure transient accounted for 44% of global rooms nights in the quarter. This segment has by far grown the fastest coming out of COVID with global leisure transient revenues in the fourth quarter nearly 50% above the same quarter in 2019.

“Even with this strong growth, demand has remained resilient. Fourth-quarter global room nights rose 5% over the year-ago quarter, leading to a 6% leisure transient revenue growth worldwide. In the U.S. and Canada, leisure revenues were up 2%. Business transient contributed 33% of global room nights in the fourth quarter. Demand from small and medium-sized corporates remained robust, and while large corporates are still lagging, they continue to post volume increases. Solid gains in ADR drove business transient revenues of 7% globally and 3% in the U.S. and Canada.”

Leeny Oberg, Executive Vice President of Development and Chief Financial Officer, Marriott International

“Our full-year outlook assumes a steady, albeit slower growing, global economy. It also reflects normalized lodging demand in most regions around the world, with Asia-Pacific expected to see higher growth in other regions as it continues to have some benefit from COVID recovery, as well as additional international airlift.

"In 2024, RevPAR growth is expected to be driven by another meaningful increase in group revenue, continued improvement in business transient demand, which will be helped by mid-single-digit special corporate rate increases, and slower but still growing leisure revenues. We're off to a strong start with January RevPAR up 7% globally, reflecting continued strong demand around the world, potentially in international markets.”

Mark Brugger, President and CEO, DiamondRock Hospitality Company

"Our group revenue pace is up 21% versus this time last year. Our urban portfolio is particularly well set up for 2024, with a very favorable geographic footprint, leveraging some of the best group markets this year, a key advantage for DiamondRock. Markets like Boston, Chicago, Washington, D.C., San Diego, New Orleans, Denver and Fort Lauderdale are all expected to have stronger citywide calendars in 2024 than they did last year, and Phoenix and Fort Worth are also within striking distance to see gains.

"We expect our urban hotel portfolio will deliver slightly stronger RevPAR growth in the second half of the year than in the first, because of the citywide calendars and on-the-books events. The main driver behind this timing is a significant shift in the convention calendar in Chicago and to a lesser extent, Washington, D.C. In Chicago, the citywide demand was fairly bunched up in 2023, with peak activity in Q2.

"In 2024, the citywide room nights are steady after Q1 in Chicago. This means the Q2 citywide room nights in Chicago are lower than last year, but that the Q3 and Q4 activity is much stronger, almost two times stronger. In Washington, D.C., the group room nights are up each quarter across the year, but most significantly in the second half of the year, up over 100% in Q3 and up 36% in Q4."

Jeff Donnelly, Chief Financial Officer, DiamondRock Hospitality Company

"We're sitting with about 530,000 group rooms versus 450,000 last year ... a significantly increased position on a relative basis. We obviously think that's going to tail off in the year, for the year, just given space availability concerns. But I think the goal is for us to sort of shift segmentation about 2 points into the group category.

"It's about 28% for us last year. We're hoping to end at about 30%. And I think what we consider to be equal, if not maybe more significant, is that we're seeing that pace increase spread throughout the portfolio. It's not just driven by good years in our big group boxes.

"Our resort portfolio though it makes up a much smaller piece of the segmentation, is also up about 20%. We've really leaned in to kind of reorienting our sales teams, and trying to drive some incremental demand into those resorts, as we saw leisure demand tail off a bit last year."

Bryan Giglia, CEO, Sunstone Hotel Investors

"As has been widely discussed, leisure travel continues to moderate and has been impacted by the imbalance of the increased number of Americans going abroad while inbound international visitation remains below historical averages. This trend is evident in wine country, as market-wide softness has continued to hamper results.

"We're focused on driving group business and generating ancillary revenues at these resorts, which partially mitigated the depressed leisure volumes in 2023. While we cannot control when leisure demand will accelerate, we can continue to work with the resorts to build a base of group business and control costs, all while maintaining a world-class guest experience."

Sourav Ghosh, Executive Vice President and Chief Financial Officer, Host Hotels & Resorts

“Business-transient demand continued its slow and steady recovery. Room nights at our downtown properties were down 15% in the fourth quarter compared to 2019, which is the smallest gap to 2019 post-pandemic. For the full year, business transient demand grew 12% over 2022. In 2024, we expect further demand growth driven by large corporates alongside rate growth in the mid-single digits.

“Going to group, 2023 was the year of group and convention hotel recovery. For the full year, group room revenues increased 21% over last year and room night volume recovered to 95% of 2019 levels. It is worth noting that our group results were positively skewed by disaster and recovery bookings in Maui. Excluding Maui, group roommate volume recovered to 94% of 2019 levels, group room revenue exceeded 2022 by 13% in the fourth quarter, driven by an increase in both rate and room nights, and we estimate roughly half of that growth can be attributed to recovery and relief groups on Maui.

“Outside of Maui, hotels in San Francisco, Boston, D.C., and Seattle contributed to the group room-night increase. Notably, November’s APEC conference in San Francisco drove results with an estimated 41,000 citywide group room nights. Looking ahead to 2024, we have 3.1 million definite room nights on the books, representing a 16% increase in the third quarter, putting us ahead of where we were this time last year. Total group revenue pace is up 10% over the same time last year, driven by rate, room nights and banquets. We continue to be encouraged by the ongoing strength of group business as evidenced by strong pace, lengthening booking windows and double-digit citywide room night pace in key markets such as New Orleans, San Diego, Seattle and D.C.”

Mark Hoplamazian, President and CEO, Hyatt Hotels Corp.

"Demand for all customer segments remained very healthy. Research transient revenue increased 6% in the fourth quarter, lapping a strong quarter in 2022. As we entered high season for most resort markets in the Americas, revenue for the month of December was 21% higher than the same month in 2019.

"Looking at the first quarter of 2024, leisure transient pace in the Americas for resort hotels is up 1%, reflecting lower demand in Maui due to last year's wildfires. ... We're pleased to see demand for leisure travel remains elevated, even with the headwind from Maui.

"Additionally, pace for our ALG all-inclusive properties in the Americas is up 11% to the first quarter of 2023. Group room revenue experienced impressive growth during the fourth quarter, up 11% compared to 2022. The Hyatt sales force delivered another excellent quarter of group production, booking approximately $500 million of business for all future periods for our Americas full-service managed hotels, a 32% increase compared to 2022.

"We set a record for total group production in 2023, booking nearly $2 billion of business for all future periods, reflecting very strong demand for gatherings at our hotels. We anticipate another solid year of demand for group meetings and events with group pace for America's full-service managed properties currently up 8% compared to 2023.

"Finally, business-transient revenue continues to gain momentum, up 14% from the fourth quarter of 2022 and reaching 93% of 2019 levels on a global basis. As we've discussed previously, business transient has fully recovered to 2019 levels in many parts of the world, while the United States continues to improve.

"Looking ahead, we remain confident that business transient will continue to recover with 2024 corporate negotiated rates in the United States up in the high single digits compared to 2023."

Justin Knight, CEO, Apple Hospitality REIT

“As we look ahead, the fundamentals of our business remain favorable, with continued strength in demand and limited new supply. As of year-end, over half of our hotels did not have any new upper-upscale or upper-midscale product under construction within a five-mile radius, providing us with the ability to meaningfully benefit from incremental demand and positively impacting the overall risk profile of our portfolio by both reducing potential downside and enhancing the upside impact from variability in launching demand.”

Liz Perkins, Senior Vice President and Chief Financial Officer, Apple Hospitality REIT

“Continued strength in leisure demand and recovery in business travel during the quarter enabled us to achieve comparable hotels RevPAR of $105 and $116, up 2% and 7% as compared to the same periods of 2022, with ADR of $151 and $157, up 3% and 5%, and with occupancy of 70% and 74%, essentially flat and up 2% to fourth-quarter and full-year 2022, respectively.

“Looking day over day, leisure travel was resilient during the quarter with weekend occupancy stable compared to the fourth quarter of 2022, with continued improvement in business travel. We anticipate leisure demand will remain stable through 2024 and that most of our growth in occupancy will come from continued improvement in weekday demand which, while elevated relative to the prior year, remains meaningfully below pre-pandemic levels.”

Chris Nassetta, President and CEO, Hilton

“As we look to the year ahead … we expect positive RevPAR growth across all segments, driven by continued recovery in business transient and group coupled with steady leisure demand. We expect continued recovery in small company meetings and large association and convention business to drive strong group performance. For 2024, group positions are up 16% year over year with small company meetings increasing as a percentage of mix, further demonstrating the value of small and medium-sized businesses given higher rates and greater resiliency.

“We do think that by the time we finish this year, assuming the broader consensus view of a reasonably soft landing … we will be at more normalized levels of [business-transient] demand. And we believe given very low supply numbers that are continuing, and continued decent economic growth, that we're going to continue to have pricing power there and everywhere else.

"[Group] demand is off the hook. Every quarter is the next new high watermark in terms of bookings for all future periods. We are seeing very good strength. We believe the group demand is quite sticky in the sense that a lot of it still is pent-up demand … in addition to incremental new demand. ... The big association, citywide business [is starting] to come back. We think group will definitely lead the system, and as a result, we think rate will be very strong. There is just so much demand and a limited amount of space.

“Leisure, we do think will grow, probably more in rate than volume. … But it will be third in line after continued recovery starting with group then business transient, then leisure transient.”

Copyright 2024 CoStar Group. All rights reserved. From By Trevor Simpson, Hotel News Now.

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