January performance data points to a pickup in hotel demand from groups and corporate travelers, which is expected to continue through the first quarter, according to Jan Freitag, national director for hospitality analytics for the CoStar Group.
Groups booked 3.5 million hotel room nights in January, data from CoStar hospitality analytics firm STR shows.
"This is still only half of the group demand it was in January of 2019 but nonetheless a sign in the right direction," Freitag said. "We see this as another indicator that corporate demand is reawakening. The expectation is that group demand will continue to grow through the first quarter."
Weddings are making up a portion of that group demand for hotel rooms on weekends, and that is driving high average daily rate, which is also expected to be strong this summer, he said.
"If 2021 results are any guide, we could see continued double-digit room rate growth in high-end resorts in leisure destinations," Freitag said.
Profit-and-loss data for U.S. hotels in 2021 revealed another encouraging trend for U.S. hotels, as gross operating profit margins have nearly recovered to what they were in 2019.
"GOP per available room is still 5 points below 2019 results, but you can also see that the difference is driven by the full-service hotels," he said. "Limited-service hotels have almost recovered their GOP margin to pre-pandemic levels, partially driven by good ADR growth, partially driven by reduction in labor costs."
However, rising labor costs, particularly as hotels staff up to meet higher guest demand, threaten to cut into those profit margins, Freitag said.
"For full-service hotels, the annual results show that labor cost is basically where it was in 2019. But higher wages, sign-on bonuses and one-time retention payments will likely continue to drive labor costs up, and if revenues don’t increase this will hurt margins."
For more analysis of U.S. hotel performance and transactions for January, watch the video above.