Current dynamics in Washington, D.C., are pulling the hotel market in two directions.
In an HNN podcast recording, PM Hotel Group President Joseph Bojanowski and D.C.-based CoStar News reporter Jonathan Lehrfeld shared their observations of the market and how recent events have both boosted the city and added new levels of uncertainty.
“Having been stuck in rush hour traffic while I was driving yesterday morning, I was next to a Metro line that had multiple cars going past, and I was looking at them,” Bojanowski said. “It was literally standing room only.”
Bojanowski later read that Feb. 24-25 had the highest Metro ridership since 2019.
“People are back, primarily federal workers into the office, and rush hour is definitely back to the 2019 levels,” he said.
Businesses in the area are already reacting to the increased number of people coming into the central business district, Lehrfeld said. Restaurants that have been operating under limited hours and lunch service since the pandemic are starting to expand those hours.
“I would say, yes, it’s coming back to pre-pandemic levels, especially now,” he said.
In the D.C., Maryland and Virginia area, PM Hotel Group has about 16 hotels with roughly 2,700 rooms, and the hotels range in size from under 100 rooms to 400-room, full-service hotels, Bojanowski said. President Trump’s inauguration in January brought in a large amount of demand for the D.C. central business district and adjacent neighborhood, even when the events were moved inside because of the weather.
The only hiccup was for the suburban and outer markets, the compression wasn’t the same as previous inaugurations, Bojanowski said. Typically, those are the areas that get some pickup from bands, support personnel and more cost-conscious attendees.
CoStar data show that hotels in the Washington, D.C., area saw revenue per available room rise 83.9% for the week leading up to the inauguration. Weekend RevPAR jumped 224.4%, driven by average daily rate rising 142.8%.
Since the inauguration, the running 28-day occupancy level as on Feb. 22 was 58.4%, a 0.4% dip year over year. However, the 28-day average daily rate of $164.95 and RevPAR of $96.95 were both increases of 3.9% and 3.5% respectively.
The seven-day occupancy level on Feb. 22 was 56.2%, a 7.4% decrease, alongside a 7.4% decrease in ADR to $155.59 and 1.3% decrease in RevPAR to $87.46.
Washington, D.C., has also been reeling from the flurry of executive orders and other decisions coming out of the Trump administration regarding federal agencies, particularly those dealing with firings and ending of leases in area buildings. Lehrfeld and the CoStar News team have been covering how these decisions have been affecting the local real estate market. As of the time of recording, the federal government has terminated roughly 440 leases in the D.C. area.
“That could theoretically impact who is in the city in the near future, in the long future, and therefore how many people are attracted to come to visit them, or to visit the city as a whole,” he said. “That could have ripple effects in the hospitality market.”
Many federal workers have lost their jobs while others are worrying whether they’ll still have a job, Lehrfeld said.
“They have had things restructured, and there are a lot of lawsuits and moving pieces that are changing every day,” he said. “I don’t want to get too in the nitty-gritty, but I will say, from friends in the D.C. area who that work in the federal government, folks I’ve spoken to, there’s just a lot of uncertainty going on.”
That uncertainty brings caution, Bojanowski said. These unprecedented actions by the federal government will have an unknown impact. The hotel industry has all types of data how to handle different types of government disruptions, whether it’s a change in administration or a budget showdown, but this has no historical data to refer to.
“In this current environment, the unknowns are greater than the knowns, and it puts us in a more reactive mode, which is a super uncomfortable way to operate a business and to try and forecast and all the other things we do in the lodging industry,” he said.
Some of the impact hotels have felt so far are cancellations. Bojanowski said his hotels have seen groups cancel contracts ranging from $30,000 to $500,000, and these are with government agencies, non-profit organizations and government contractors.
Another new variable is many government groups negotiating a contract are requesting to add language to the force majeure component that would allow them to terminate the contract without a fee if there’s a disruption or cancellation of their currently approved funding, he said.
For more of the Washington, D.C. hotel market discussion with Joseph Bojanowski and Jonathan Lehrfeld, listen to the podcast embedded above.