NASHVILLE, Tenn. — The sudden whiteout of events calendars at the height of the COVID-19 pandemic shocked hotel markets in large urban centers such as Los Angeles, where that type of demand isn't expected to recover until at least 2023.
Chelsea Benitez, director of tourism insights at the Los Angeles Tourism & Convention Board, said citywide events were "quick to leave and slow to return."
Los Angeles County averaged 26 conventions a year between 2017 and 2019, with an economic impact of approximately $570 million each year, she said. In 2020, Los Angeles hosted just three citywide events, all in the first quarter. As a result, total visitor spending at the end of 2020 was down 60% from 2019.
It's not looking much better for 2021, with only three citywide events "on the books ... all in the fourth quarter," Benitez said during a session at the Hotel Data Conference which also included data from CoStar hotel analytics firm STR, presented by Claudia Alvarado, analytics manager, financial performance.
One event that has drawn a big crowd to L.A. in past years, E3 — the Electronic Entertainment Expo — was canceled in 2020, and was streamed online in 2021 with no in-person attendance. In June 2018 and 2019, the event drew 60,000 attendees who booked 30,000 hotel rooms at an average daily rate of $300, Benitez said.
"In addition to E3, there were two other citywide conventions held in both June 2018 and 2019. Those conventions directly generated compression, leading to nights where occupancy was over 90% and generated ADR premiums," she said. "STR defines compression as any day that has occupancy over 90%. And you can see, without those citywide events in 2021, there are actually zero nights with the occupancy over 90% and most nights were below 70%."
The loss of international tourism also has set Los Angeles back considerably, Benitez said, adding that "L.A. County welcomes the second-highest number of international visitors ... in the country," behind New York City.
"65% of our visitors stay overnight, and of those, 66% stayed in paid accommodations, and 85% of our visitors were for leisure," Benitez said.
Group business makes a difference in such a leisure-dependent market, Benitez said.
"Although we are a predominately leisure market, I call the group and business traveler the small but mighty segment," she said. "To put that into perspective even further, prior to 2020, L.A. County experienced 10 consecutive years of growth in visitation, hotel room demand, rate and visitor spend. Total visitors to the destination peaked in 2019 at 50.7 million, but fell by nearly half in 2020.
"Our domestic visitation fell 42% and international was obviously hit the hardest, and it fell 78% in 2020 versus 2019. We also saw our room demand decrease by 42% and ADR decreased by 23%."
Alvarado said that STR's latest forecast with partner Tourism Economics calls for total visitation to Los Angeles "to recover back to that 50-million mark in 2023."
"This is led by domestic visitation. International is going to lag about a year," Alvarado said. "Hotel room demand and total overnight visitation will also be back by 2023, and ADR will be the last metric to recover, in 2025, which I think is true throughout the nation — that ADR is going to be the last part to recover."
In the meantime, some of that group and events hotel demand is being replaced by transient, leisure guests. The data also shows that in cities where COVID-19 restrictions were relaxed sooner, hotel markets had stronger profitability levels.
Markets "at the bottom, like San Francisco, will probably start recovering some of that profitability as they start welcoming in some more of these events," Alvarado said.
The same applies to international markets, such as Glasgow, Scotland, where advance bookings are picking up around the United Nations Climate Change Conference — known as COP26 — which is set for early November.
Hotels are already close to 100% booked in Glasgow for the event, and some of that demand is benefiting Edinburgh, which is about an hour's drive away.
"This is very powerful data to have, to see what's trending not only for businesses, but it also gives you an idea of the confidence level of all travelers into a market," Alvarado said.