Luxury hoteliers took full advantage of pent-up room demand from high-end travelers and exerted pricing power in resort destinations around the globe, according to occupancy and average daily rate analysis by STR, CoStar's hospitality analytics firm.
Higher vaccination rates and loosening travel restrictions spurred travel interest to resort areas worldwide. However, because global vaccination and quarantine rules were inconsistent and subject to change from country to country, hotel guests often chose to stay closer to home, as evident in the higher room rates achieved in rural resort destinations in many countries.
Certainly occupancy rates at global luxury hotels remained depressed in 2021. Through November of that year, luxury class operators in Europe reported average hotel occupancy of 30%, while in the Americas the average hotel occupancy was 45% and in Asia Pacific it was 40%. Nonetheless, average daily room rates at luxury properties increased at a healthy pace compared to the prior peak. Hoteliers in Europe outpaced average 2019 room rate results by 21% and in the Americas by 13%. The stricter restrictions in Australia, China and other Asian countries did take a toll on the high end as luxury class room rates in the region declined 11% compared to 2019.
However, the stronger hotel rate performance in luxury resorts was not matched by all luxury class hotels. Luxury properties in urban downtowns, which typically rely on high-end frequent individual travelers and incentive group demand, failed to generate higher occupancy or rates. The markets with the sharpest luxury room rate declines compared to 2019 were all located within major Asian metropolitan areas.
Luxury class room prices in the U.S. followed the global trend. Rates in beach and leisure-oriented areas were much higher than comparable 2019 results. American leisure travelers were eager to spend money on much-desired experiences, such as vacations and long weekend getaways. Postponed weddings, birthdays and other social celebrations took place, often in areas that allowed for an outdoor component. U.S. resort destinations also benefited from an influx of travelers who could not go overseas but were willing to pay top rates for a premium property in a leisure area.
The lack of group and corporate demand continued to stifle hotel occupancy in downtown locations and, with it, pricing power. Given the low average occupancy in luxury hotels throughout 2021, the average room rates compared to 2019 could be viewed as a success story as overall hotel performance for this segment could have been much worse. But revenue managers and operators at these resorts appeared to conclude that sharply lowering rates in a global pandemic was not going to increase demand much beyond what they were seeing, so room rate discounts stayed manageable.
These room pricing trends are expected to continue in 2022 given the desire by travelers to stay close to home and the ability of luxury hotel operators to capitalize on this trend. Downtown locations will likely continue to struggle to attract corporate demand, while hotels in beach and remote, experience-driven destinations should continue to report strong demand and room rates.