Leisure demand is starting to wane after years of sustained growth that carried the hotel industry's recovery from COVID-19, but group and business travel demand are concurrently ramping up to pre-pandemic levels and offsetting the leisure trends.

For commentary from hotel brand and real estate investment trust executives on travel segment performance in the second quarter of 2024, read below.

“In the quarter, system-wide RevPAR increased 3.5% year-over-year above the midpoint of guidance due to robust group performance, continued recovery in business transient and easier holiday comparisons.

"Leisure transient RevPAR continued to exceed prior peaks, supported by solid summer travel demand, particularly in international markets.

"Group RevPAR rose more than 10% year-over-year, led by strong demand for corporate and social meetings and events and booking windows continued to lengthen. For the full year, group position is up 10% over last year, with position up mid-teens over the next several years.

"Group is getting back to pre-COVID typical levels. Even if you look in the second quarter group mix, it was pretty much at where we were pre-COVID. I mean, overall mix in Q2 was 20%, which is exactly what it was pre-COVID. … The group booking window continues to extend just because people have to go further out. There's just not enough space available for their needs."

“On a global basis in the second quarter, we saw RevPAR growth across all three of our customer segments: group, leisure transient and business transient, with each segment experiencing increases in both room nights and average daily rate. Group, which comprised 24% of worldwide room nights in the quarter, remained the strongest customer segment. Compared to the year ago quarter, group RevPAR rose 10% globally.

“Full-year 2024 worldwide group revenues were still pacing up 9% year over year at the end of the second quarter with a 5% increase in room nights and a 4% rise in ADR. Business transient, which contributed 33% of global room nights in the quarter, saw a 4% increase in RevPAR. Leisure transient, which accounted for 43% of worldwide room nights in the quarter, posted a 2% rise in RevPAR.

“Within the business-transient segment, demand from small- to medium-sized corporates, which now account for nearly 55% of business transient room nights, has grown significantly over the last few years.”

“We saw last week, demand being up 30 basis points in the economy and 60 in the midscale, and we know that the industry is projecting growth next year.

“I think it's 100 to 200 basis points of economy or midscale RevPAR growth in '25. And we think back to the last four lodging cycles, select-service domestic RevPAR has grown ... 3% on a CAGR basis, and that will eventually materialize.

“In terms of all of our important consumer leading indicators that we continue to look at, leisure travel sentiment continues to improve. It's up now 400 basis points from where it was at the end of last June. We're not seeing any difference in who's checking in to our hotels. Our middle-income guests are still both more employed on higher wages and savings than they had back in 2019.”

"Systemwide RevPAR increased 4.7%, led by increased business and group travel. In the United States, RevPAR increased over 2%, reflecting the timing of Easter and strong results from group and business transient travel. Large corporate accounts contributed to both group and business transient travel, benefiting hotels in major urban markets. ... We are lapping challenging comparisons in Maui due to the wildfires in the third quarter last year, and we have several resorts undergoing exciting, transformational renovations.

"We expect full-year, systemwide RevPAR growth between 3% and 4% compared to 2023 and expect group and business transient revenue growth to outpace leisure transient for the second half of the year. We anticipate United States RevPAR growth for the full year of approximately 2% compared to 2023 led by group and business travel in the third quarter."

"There is a bifurcation today between the high-end consumer who is still strong, moderating somewhat candidly, and the low-end consumer. And I think you're seeing that in the earnings reports that are being printed this quarter, there's a differentiation. From our perspective, we talked a bit about where our leisure transient rate is, and where our out-of-room spend is, how our out-of-room spend is trending, and we're very comfortable with how our consumer is behaving.

"We think that what's happened in this quarter is that the high-end leisure traveler went abroad, they went to Europe and the Caribbean and Japan, and that it's a moment in time, much like when the leisure consumer led the recovery coming out of COVID. It was revenge travel and I think we saw a bit of revenge travel in Europe last year when that was the first year that Europe was opened up without any restrictions, and we're seeing that this year.

"And it's frankly, it surprised us a bit because I know we've talked about this before. ... If you look at all U.S. outbound at roughly 120% of 2019 levels, that equates to 6 million additional outbound trips. And that is — that's a big number, but people they're spending money, and we're not seeing the corresponding increase of international inbound. So TSA checkpoints give us confidence that travel is still occurring. We hit a record in July of, I think, 3 million throughputs in one week in particular. So we believe that this is a moment in time and the pendulum will swing back, and we will be well-positioned to perform going forward."

"What gave us sort of the confidence in our guidance as we went about it is really the group booking pace remains strong for the second half. We actually picked up 241,000 rooms in Q2 for the second half, and about 143,000 or so was for Q3. So that's 68%. So Q3 pace is actually high single digits.

"We're very confident about group in the third quarter. We did de-risk the fourth quarter from a group perspective just around election weeks. Typically, in any given election year, the week of elections is always a softer group pace, and you can see that. But this year, we are seeing softness following the election week as well in terms of pace. So we adjusted for that.

"The bigger two pieces that we spoke in our prepared remarks is really the softer recovery that we are seeing in Maui. That's in our second half as well as what we did was we saw these short term — a lot of lack of short-term leisure pickup in Q2, and that effectively we have extrapolated into the second half as well."

"Group continues to be a key driver for our growth as we look over the balance of 2024. Group demand is expected to remain very strong. Group revenue pace as of June 30 was up nearly 10% compared to the same time last year, while Q3 group revenue pace is up nearly 13% driven by the month of August and September, with pace up over 30% and 22%, respectively, when exceptionally strong convention and citywide activity is expected in Chicago, New Orleans, Orlando, Denver and Miami.

"Chicago and New Orleans citywide room nights are up 200% and nearly 300% year over year, respectively, and both markets are expected to have near record convention citywide room nights in the second half."

“Business travel continues to recover, both group and transient. Leisure demand remains healthy, and we certainly saw substantial increases in our portfolio, but leisure demand across the industry remained generally flat. Weekday pricing edged higher in our urban portfolio, while our weekend pricing at both our urban hotels and resorts suffered as we added occupancy at lower rates and as the leisure customer has become more price-conscious. In our portfolio, we expect further year-over-year occupancy growth in the third quarter as well as continued pressure on our average rates.”

“We've observed increased weekday demand from corporate groups, which is lower-priced than our average transient rates. Additionally, we've added leisure occupancies from wholesale accounts and other discount channels. While these segments yield lower ADRs compared with the direct booking segments, corporate groups and consortia generate healthy levels of out-of-room spending. This contributed to the growth in total RevPAR at our resort properties, which improved by 0.6%.

“Despite the moderation in ADRs, our resorts have maintained a significant 30% premium in rates compared to 2019. The increase in demand from discount channels indicates that some leisure travelers, while still traveling, are becoming more price-sensitive and seeking deals and bargains. The shift in customer behavior is one of the reasons we've adopted a more cautious top-line outlook for the second half of the year.

“Regarding our segmentation in Q2, group demand increased by 2.4% over the same period last year, representing approximately 27% of our customer mix. This growth was primarily driven by a notable 11% rise in corporate group demand compared to the previous year. Overall, group revenue saw a 4% increase. Transient demand also strengthened with a 4.4% uptick over last year, supported by gains from OTAs, consortia, domestic and international wholesale and airline crew bookings.”

"I think it's more of a reversion back to prior patterns as opposed to just seeing a weakness in the overall leisure transient customer. I mean during — kind of during the period of COVID you were penalized for having group, you were penalized for having base because the demand was so strong and the demand pattern was so consistent.

"I think we've seen midweek in some of our resorts reverting not back to what it was in '19, but definitely not what it was in '21. So we're having to layer in more of those discounted leisure customers midweek and more group. And I think that's where we've had success, honestly, in building the base. I think we can continue to do it. I mean we were up 20% in group in our resorts for Q2, and we anticipate to be up about the same in Q3. That's where our pace is sitting.

"So that continued shift, I think we still have the ability to put more group into these resort assets and get back to closer to what we were in 2019 from resort percentage of segmentation."

"We'd just be speculating from a trading down perspective. I think we do see a bit more people start looking for discount or looking for a sale and willing to change travel pattern relative to price. I don't know if that's necessarily trading down or as much as it's trading days. But I think that's what we've been doing, I think, as we revert back to prior patterns is really trying to do more kind of price variability between weekends and midweek and between peak periods and non-peak periods — encourage travelers to fill up our hotels off-season. I think that's definitely a trend that we've seen kind of continue over the last 18 months."

“While we have been pleased to see steady improvement in overall demand, leisure demand — which has produced the strongest rate growth post-pandemic — showed signs of increased rate sensitivity during the quarter, and midweek demand came at lower absolute rates than those achieved on weekends with the combined effect weighing on our overall ADR growth for the quarter.

“Weekend ADR was up 1.1% in April, but down 1.9% and 2.3% in May and June, respectively. Weekday ADR was up 1.1% in April and up slightly year-over-year in May and June. Our strongest rate growth came on Monday night, followed by Tuesdays and Wednesdays where we achieved 86% occupancy during the quarter. Weekend ADR was $170 and weekday ADR was $156 for the quarter. We believe that future growth will come largely from continued improvement in midweek occupancy, which will support more significant midweek rate growth, both of which have lagged the leisure recovery post-pandemic. Same-store room-night channel mix quarter over quarter remained relatively stable with brand.com bookings at 40%, OTA bookings and property direct at 13% and 24%, respectively, and GDS bookings representing 17% of our mix.

“Second quarter same-store segmentation was largely consistent with the second quarter of 2023. Bar remained strong at 32%. Discounts represented 29% of our occupancy mix. Group was 15%, and the negotiated segment represented 18% of our mix.”

“Our urban portfolio continues to benefit from all segments of demand with growth in business and group demand, driving robust RevPAR growth in our markets such as Boston, Denver, Los Angeles, San Diego, Miami and New York, while Atlanta and Austin were held back by a renovation in each market, respectively. Relative to segmentation, [business transient] was once again our top-performing segment during the quarter, generating outsized revenue growth of 13% and balanced with an 8% increase in occupancy and a 4% increase in ADR as business travelers continue to expand their travel frequency. Corporate demand benefited from the ongoing expansion of travel from large corporations and resilient demand from the SMEs, which resulted in our midweek RevPAR growing by 4%.

“Our group segment had another solid quarter, achieving revenue growth of 5%, led primarily by ADR, which grew by 4.7%. Our group performance was driven by favorable citywides in many of our markets, several significant events across our portfolio, such as the 150th Kentucky Derby and PGA Championship in Louisville as well as our strong in-house group base. The attractiveness of our meeting space to small groups allowed our second-quarter bookings to exceed last year by 19%, with 27% of our revenue activity booked in the quarter for the quarter. Overall, group booking trends remain healthy as demonstrated by our current 2024 booking pace of 107%, which increased 100 basis points since the start of the quarter.

“With respect to leisure, we were pleased with our results this quarter, in light of the continuing normalization of leisure rates across the industry and increased consumer price sensitivity. Our leisure room nights were up 2%, with healthy demand coming from markets such as Southern California, New York City and our drive-to markets such as Charleston and Orlando.”

"During the quarter, we saw continued strength in group activity and further recovery in business-transient demand, while the backdrop for leisure travel was more mixed.

"As we look into the third quarter, we expect our convention hotels to once again lead in RevPAR growth, with further outsized increases in Washington, D.C., combined with more favorable booking patterns in Orlando, San Francisco and San Diego. Our group pace for the second half of the year is up 17%, and while it remains early, we are encouraged by our group booking activity for 2025, which is trending up high single digits. We continue to monitor trends in business travel and are encouraged by what we saw in the second quarter."

Editor’s note: Christopher J. Nassetta serves on the board of directors for Hotel News Now’s parent company, CoStar Group.

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