With almost a complete lack of visibility into 2021, any attempt to discern which markets or market types will recover faster requires a look at a broad array of factors.
GLOBAL REPORT—With the coronavirus pandemic depressing almost all corporate and group business in 2020, hotels in smaller drive-to markets generally outperformed larger urban markets thanks to leisure demand. Now, in 2021, the question remains whether hoteliers can expect a repeat performance.
Predicting the next year’s hot markets is a normal pastime for hoteliers trying to find the best locations for deals, new construction and other opportunities. After a year with almost no visibility, though, trying to discern anything about 2021, let alone predicting successful markets, is nearly impossible. Factors such as surges in COVID-19 case numbers, travel restrictions and economic pressures can change market conditions daily.
By broadening the scope beyond specific markets, hoteliers can look to other factors, including how market types performed in 2020—at least, to some degree—for some insight into how certain types of markets might perform and why.
Possible recovery scenarios
When considering what market types are more likely to perform well in 2021, Jan Freitag, SVP of lodging insights at STR and national director for hospitality market analytics at CoStar, said he sees two main scenarios that could play out in the recovery. STR is the parent company of HNN and a division of CoStar.
One possibility is a repeat of 2020. Those who traveled this past year generally stayed close to home for several reasons, Freitag said. At the beginning of the pandemic, they didn’t trust other people, they weren’t quite sure how the virus spread, they didn’t necessarily trust airplanes and driving seemed safer. Travelers also felt they better understood their local regulations than those in other countries.
In the U.S. over the summer, markets such as Miami Beach and others along Florida’s Gulf and Atlantic coasts saw stronger performance as did markets in the Dakotas, Wyoming and Idaho, Freitag said.
“The places that had wide-open spaces, access to natural beauty, parks, beaches,” he added.
The other possibility is the exact opposite. If the general public—not just frontline workers and high-risk patients—starts receiving vaccinations by the summer, the pent-up demand for travel could be unleashed by the late summer or fall, Freitag said.
“Then the markets that do well will likely be markets that have some group component of that room demand, and that sort of jives with our forecast for the U.S. where we're saying, ‘Look, we think that demand will actually not return in force, but there will be some corporate group room demand after Labor Day,” he said.
In this case, downtown locations will be comparatively better off than they were in 2020. Comparatively is the key word because these markets “got hammered absolutely” this year, Freitag said. Urban markets in early December were down 70% and group revenue per available room has been down between 80% and 90% since April.
“There’s a lot of pent-up demand, a lot of pent-up meetings, and so therefore the winners will be the very stark losers—the top 25 markets that were hit hard in 2020,” he said of the second scenario.
Business and leisure
It’s difficult to generalize potential market performance because different countries are moving at their own pace with lockdowns, and even cities within those countries can move at a different pace, said Russell Kett, chairman at HVS London.
“What this has taught us all is that we have to be nimble, we have to be light-footed, we have to be able to go with the flow, we have to be able to react very quickly to whatever happens,” he said.
One way to look at potential market performance is to consider sources of demand. As businesses re-establish themselves to become more profitable, they are learning what they can do without, Kett said. They’re looking at every expense and considering which ones are necessary. Business travel is one such expense that employers globally will look at carefully.
“Many people who are used to business travel as part of their work will find themselves scrutinized before every trek, so people will have to make sure that whenever they do travel for business, they are traveling efficiently, effectively and probably with greener credentials than before,” he said.
While all travel will go under review, shorter trips will receive more scrutiny than longer ones, Kett said. Employers will consider whether the trip is necessary or if the trip’s goal can be achievable through a video meeting.
“It is likely that some business travel will take longer to come back, if at all,” he said.
Though previously not seen as important for most hotels, leisure travel became the darling of 2020, and that should continue into 2021, Kett said. Those who do travel for business will likely tack on some leisure element to it. If people can’t travel for business, they might be more inclined to travel for leisure, increasing the number of leisure trips they take.
It will be quite some time before meetings, incentives, conferences and events business returns to previous volumes, he said.
“Most hotels which are big box—meaning the conference hotels—will have to find a way into that space more creativity until that business comes back into its volumes,” Kett said.
MMGY Myriad began researching general consumer sentiment at the start of the pandemic, said EVP and Managing Director Julie Cuesta. In September 2020, Myriad and Travel Market Report released the Travel Advisors COVID-19 Sentiment Barometer, which also looked at international destination trends.
Mexico was a popular destination in 2020 and that’s expected to continue in 2021, Cuesta said. A large part of that depends on how countries respond to the pandemic, particularly how open their borders are and testing requirements. Mexico has been one of the relatively easiest destinations to travel to and has many of the larger-name hotel brands that guests trust because of their health and safety protocols.
There is still a lot of interest in Europe, specifically Italy, Germany and the United Kingdom, despite some of the recent challenges the continent has seen lately, she said.
For the Caribbean and Central American destinations, it remains to be seen how interested consumers will be, Cuesta said. Many countries in Asia and the South Pacific have significant restrictions in place, making it difficult to predict what travel to these countries will look like in 2021.
Following the early news of vaccine trials and their reviews by the Food and Drug Administration, there was an immediate uptick in travel bookings, Cuesta said. Consumers are starting to look at potential travel plans for later in 2021 and 2022. They’re waiting to see what happens after the first several rounds of people get vaccinated, but they are generally optimistic they will be able to travel again soon.
One thing to keep in mind for all travel is how big of a role air access will play in determining where people will go in 2021.
“If you can’t get there relatively easily, and that doesn’t necessarily mean a nonstop flight, but if you can’t get there relatively easily, that may impact the places that people decide to go,” Cuesta said.