Lacking group business, top 25 markets lag others in US
 
Lacking group business, top 25 markets lag others in US
17 JUNE 2020 8:08 AM

As corporate demand evaporated during the pandemic, STR data shows the top 25 U.S. markets experienced a steeper drop-off in RevPAR compared to the overall U.S.

SALISBURY, Connecticut—The global COVID-19 pandemic has devastated the travel and tourism industry and deeply affected corporate travel behavior.

Since the larger U.S. hotel markets have a disproportionate share of corporate travelers, it is not surprising that the STR data reflected a steeper revenue-per-available-room decline for top 25 markets than for the U.S. overall. STR is the parent company of Hotel News Now.

Source: STR, © 2020 CoStar Realty Information, Inc.

In other words, even though RevPAR declines of around 80% for the U.S. seem hard to comprehend, the situation in the larger markets was even more dire. This devastating performance was driven by the complete evaporation of group demand. Citywide conventions and corporate meetings were postponed to later in the year, moved online to meeting platforms or canceled outright. The group and transient RevPAR data for the last two months tells the story of this steep drop-off.

Source: STR, © 2020 CoStar Realty Information, Inc.

The RevPAR drop tells one side of the story, but the true impact of stay-at-home orders and corporate travel restrictions becomes clear when looking at the absolute group occupancy. In April, three markets (Denver; St. Louis; and Nashville, Tennessee) reported 0% group occupancy.

Source: STR, © 2020 CoStar Realty Information, Inc.

It’s important to note the New York City data is likely skewed by first responders and medical personnel being housed in hotels and reported as “group.”

When overall occupancies in the larger luxury and upper-upscale hotels dropped to the single digits in March and early April, some owners took the only reasonable step: they furloughed their staff and closed the hotel. In fact, some markets actually closed more than one-third of their inventory temporarily.

Source: STR, © 2020 CoStar Realty Information, Inc.

This implies that the occupancy in the top 25 markets that we reported at just under 39% in March and around 23% in April was actually lower when taking the total inventory into consideration.

To add further bad news, the number of rooms in construction was never higher. And almost half of those rooms are going to open in the larger markets (this list includes Las Vegas, hence top 26).

Source: STR, © 2020 CoStar Realty Information, Inc.

Overall, the April data was quite devastating for the larger markets. The good news is that April is now behind us, and with stay-at-home orders expiring in the U.S., consumers are ready to travel and spend weekends away from home. The weekly occupancy data for the larger markets reflect this upturn.

Source: STR, © 2020 CoStar Realty Information, Inc.

In this chart, New York City is leading and Oahu, Hawaii, is lagging. However, overall, the trend is clear and pointing in the right direction. Our expectation is that the larger markets will continue to lag the overall U.S. performance until business travel resumes and that they will once more lead all other markets when group meetings are being hosted again.

Jan Freitag is the SVP of lodging insights at STR.

This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to comment or contact an editor with any questions or concerns.

No Comments

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.