As leisure demand has tailed off somewhat to end 2021, hopes in the hotel industry have turned to a strong holiday season to salvage a generally weak fourth quarter.

The rise of the omicron variant and cases of COVID-19 have spurred new waves of travel restrictions — at least internationally — and sparked concerns that the holiday travel season won't quite live up to those hopes.

But hoteliers say early signs are that demand, particularly domestic leisure travel for the week between the Christmas and New Year's holidays, has remained resilient, even surpassing 2019 levels in some measures.

Jan Freitag, national director of hospitality analytics for CoStar, said American leisure travelers are simply undeterred by COVID-19 at this point. He said travelers have some degree of confidence due to the availability of vaccine boosters and reports that omicron, while more contagious, could lead to less severe illness.

"The travelers who want to travel will continue to do so and say, 'Yeah, I feel comfortable,'" he said.

Freitag said it has been like night and day between domestic and international hotel demand, particularly due to travel rules and testing requirements.

In numbers released Tuesday, AAA reports an estimated 109.5 million travelers for the holidays, which represents just an 8.2% drop from 2019 and a 33.9% increase compared to 2020. The vast majority of travel will be on roads, with 100.1 million automobile travelers compared to 6.4 million air travelers, although air travel will be up 184% compared to 2020 and down just 12.6% from 2019.

The data is less favorable for international travel. A new Reuters report citing data from travel booking site Trivago noted a 35% increase in cancellation rates with a 10% decrease in "holiday travel planning."

"If you were planning to go abroad, you'll have to contend with many more restrictions that are just harder to navigate," Freitag said. "But if you were planning to stay in the U.S. and go to Aspen or Florida, you're more likely to say, 'Yep, I'm still doing that.'"

The recently released Portrait of American Travelers survey from MMGY Travel Intelligence noted the percentage of U.S. adults planning to travel over the next six months has "dipped only slightly from the previous quarter" with 71% intending to travel compared to 73% in the fall. The study also noted news about omicron was more likely to impact travel decisions for vaccinated people than those who were not vaccinated, although vaccinated travelers were the more likely cohort to stay in hotels.

Hotel operators said so far they haven't noticed significant levels of hotel cancellations, and there is still plenty of reason to expect a strong holiday travel season.

Pete Sams, chief operating officer for Davidson Hospitality Group, said his company did observe a slowing in bookings pace after news of omicron first broke, but that trend "quickly corrected itself."

He agreed that travelers have reached a point that they are more comfortable with the risks associated with travel.

"People can make that personal decision that the risk-reward to be able to get out, to be with loved ones and travel and participate in events is much more acceptable and something they are willing to do," he said. "So, the reality is we haven't seen much impact [from omicron] at all."

Kevin Fraser, senior vice president of sales and revenue generations for Hotel Equities, said his company's hotels still have "significant short-term demand" with the booking window much shorter for Christmas, New Year's and even the recent Thanksgiving holiday, which broke hotel demand records in the U.S.

He said his expectation for the totality of the holiday season is to reach demand roughly 90% of what Hotel Equities had in 2019.

"That's how things have been trending, and we'd consider that a success," Fraser said.

Because of the shorter window between bookings and stays, though, he admitted his company has less "line of sight on that demand" than executives would have prior to the pandemic.

Fraser agreed that leisure demand is strong, particularly at resort properties, and that is true across various markets in Hotel Equities' portfolio.

"We were pleasantly surprised that whether you're in Pensacola or Alamogordo, New Mexico, you're getting the same type of demand," he said.

Sams agreed, adding that resort demand has been especially strong across Davidson's portfolio, which includes multiple Margaritaville resorts.

Cory Chambers, senior vice president and chief revenue officer for HVMG, said demand is strong for his company's hotels, especially in Florida.

"Those have really outperformed our urban destinations, and looking at the rest of the month, they have the largest positive variances, while the biggest negative variances are in places like the Northeast," he said.

For the latter half of December, Chambers said HVMG's portfolio is not far from 2019 levels, with occupancy down roughly 3% and rates up 5% to 6%, combining for a slight increase in revenue per available room. He said the demand patterns are very up and down during that period, though, with occupancy down significantly prior to the Christmas holiday and way up from Dec. 26 through New Year's Eve.

That data supports a phenomenon Freitag said he observed during the Thanksgiving holiday, in which more remote workers extended travel plans to see family and friends.

Chambers said he expects that more spread-out leisure destinations will continue to outperform urban hotels, even during a holiday such as New Year's Eve that traditionally favors urban leisure travel.

"The reason people go to destinations [like New York for New Year's Eve] is to be in large groups, and that's obviously not a COVID-friendly environment, whereas a beach in Florida is not as crowd-oriented," he said.

In terms of who is traveling and how they're traveling, Sams said trends remain similar to those of the past couple of years.

"There's still a heavy slant towards drive markets," he said. "There's maybe a little less air travel than we've seen in the months prior, but, in general, we're still filling out hotels particularly in leisure destinations."

In terms of marketing, Fraser said his company is focusing on family travel with packages, and it has been active on social media to reach potential travelers.

"We've really pushed that media presence whether that's through Instagram, Facebook or other social media channels," he said.

Sams said he remains optimistic that the momentum from the holidays will continue unabated into 2022, with some signs that group demand will come back strong during the year, leaving business transient demand as the final laggard.

"I don't see another wave of regression," he said. "Our 2022 trends are approaching 2019 levels, within single digits percentage-wise. That's what we're budgeting for 2022 in our same store. With group business, we have about 80% of what we did in 2019, and business travel we've conservatively budgeted closer to 50%, but that's offset again by carrying forward the strong leisure travel we've experience in 2021 even versus 2019."

Chambers agreed, saying he is "very optimistic moving into 2022," and remains convinced that the reversal in recovery trends in late 2021 was more tied to seasonality than anything else.

"What has proven to be true is that given the time and resources, people do want to travel more for business or leisure," he said. "Now, it's more about getting back to more standard norms around how we do business."

While business transient will likely continue to be a drag on overall performance in the short term, Chambers is encouraged by leisure demand.

"Leisure appears to be trending, over the longer-term horizon, to be well above what it was pre-pandemic, and I think those trends will endure," he said.

Shorter booking windows could be a less-positive, long-term consumer change, Fraser said, but his company is poised to make the most of what demand is out there.

"It's the world we live in. It's the new normal," he said. "We've been living it, and we know how to react to it. Our teams need to be ready."

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