The end-of-year holiday season in the U.S. typically does not drive a lot of business to hotels. Like offices, business travel tends to shut down for the holidays. And families who are traveling often stay with other family.
Demand for hotel rooms this holiday season isn't expected to be significantly more than in past years, but it also shouldn't be markedly down, experts said.
There will be the usual bursts of visitors to iconic holiday destinations as tourists celebrate en masse in places like New York City's Times Square and warm weather spots as northerners and others flee the snow.
But in general, hotel demand is expected to follow seasonal patterns.
Isaac Collazo, vice president of analytics at STR, said the easiest comparison might be the holiday season of 2011, when the dates and holidays on the calendar were identical to this year. Another similarity between 2011 and 2022 is that both are rebuilding years. STR is CoStar's hospitality analytics firm.
In the run-up to the Christmas and New Year's holidays in 2011, occupancy and rates followed a similar trajectory as what has been recorded so far this year, he said.
Hotel demand has gone through similar peaks and dips for all of the holidays, so while weekly performance data indicates a slowdown, for this time of year it's “pretty normal,” he said.
From Dec. 18 through Dec. 31, Collazo said he expects U.S. occupancy will drop by about a point compared to 2021 while average daily rate will grow 2%, leaving revenue per available room flat. He expects occupancy to be down by less than a point compared to 2019 levels despite some gains in hotel demand, due to growth in the supply of hotel rooms.
Compared to 2019, ADR is expected to grow by more than 12% and RevPAR by more than 10% — not enough to keep up with high inflation.
With both Christmas and New Year’s Day falling on Sunday, most people will have the Mondays after off, which should help to boost hotel demand into the first week of the year, and that is expected to lead to slight year-over-year gains in occupancy, ADR and RevPAR.
The Sunday holidays create two three-day weekends that allow traveler to stay longer, Collazo said.
Travel’s Resiliency
Over the past year, travel has proven more resilient than ever, said Greg Schulze, senior vice president of strategic travel partners at Expedia Group.
Even in the face of economic uncertainty, travelers are not trading down and continue to prioritize experiences, he said.
“People are using their money to travel, and they are doing that in every way,” he said.
Drive-to holiday destinations have grown significantly in popularity, which has shown up in bookings for Expedia's vacation rental business, Vrbo, Schulze said. The strong U.S. dollar has also incentivized travelers to head to Europe and other parts of the world.
Economic concerns will create headwinds for lower-income travelers, Collazo said. That demographic is generally more affected by inflation and higher interest rates because they don’t have as much in savings. Those who are traveling in this segment are likely to use credit cards to pay for their trips, so if they traveled last year, they may not this year.
Those in the middle, upper-middle and upper income brackets will be less affected by economic headwinds, with the possible exception of anyone recently laid off, particularly from tech companies, he said.
The omicron wave last year put a damper on travel, but this year health concerns aren’t holding people back as much, Schulze said. While COVID-19 is completely in the rearview mirror, people want to travel, and they feel comfortable doing so now.
“Travelers feel very safe traveling these days, so they’re not hesitating to make those bookings,” he said.
A Hotelier’s Perspective
Island Hospitality Management’s business on the books for the second half of December and first week of January is pacing ahead of both 2021 and 2019 levels for occupancy and average daily rate, said Michele Mainelli, senior vice president of revenue management. Occupancy is ahead by a marginal amount while rates are significantly higher, driven by inflationary pressures.
“Even with last year opening up significantly since the pandemic hit, this year it just seems to be people need to travel and see other people,” she said.
Most of the business coming in over the holidays is from leisure travelers, Mainelli said. Most of the corporate group business on the books is primarily from holiday parties, and some travelers are mixing business and leisure.
Many travelers are headed toward warmer weather, she said. A large portion of Island Hospitality’s portfolio is on the East Coast, Southern California and Florida, and hotels in those destinations fill up as the weather gets colder.
Leisure travelers have been taking advantage of some of the end-of-year discounts, though those are smaller than they were in the past.
“People are taking advantage of that, and I do think they're booking a little sooner than they have for the last few years,” she said. “There's still some people holding out and looking for even further discounts. I think eventually they’re booking because they don't find the discount they're necessarily looking for, but they’re still going.”