Hotel demand softened in some segments and markets in 2023, and hoteliers say 2024 will come with some shifts as well.
Mission Hill Hospitality Managing Director Mike Wilbert said there was a "remix or shift in demand" from heavy leisure demand in 2021 and 2022 to a softening 2023. Corporate and business transient group, however, became more balanced.
Heading into 2024, positive shifts will be most visible in the group segment and in secondary and tertiary markets, executives say.
Chris Green, president of Remington Hospitality, said that because there's been such a high level of demand for group business in some markets, it's creating a spillover of demand in secondary and tertiary markets.
He compares it to a flood map.
"City centers have started seeing a strong return of corporate, leisure, big associations [and] sports. That's pushing business and opportunities out to suburbs, secondary, tertiary [and] airport locations. This is good for everyone; it's lifting all these markets," he said.
Pete Sams, chief operating officer at full-service hospitality management company Davidson Hospitality Group, said the mix of group business will continue to grow in 2024. He added that hotels in its tertiary markets are catching up to the urban city centers as well.
"If you look at '22 to '23, that's where we saw the most shift; [it] was back to group but still lagging behind pre-pandemic. I think now in 2024, we're back to the more traditional mix," Sams said.
There were some circumstances in 2023, however, where Davidson's hotels intentionally tempered group business because it had the choice to be more selective with demand.
His team chose to lean more on the transient mix in these instances and didn't want to return to the group mix achieved pre-pandemic because the cost of acquisition on a group can be greater than the transient guest.
Total revenue per available room and total revenue per operating room achieved through on-property guest spend became a focus.
Heading into 2024, Davidson plans to continue that strategy of relying more heavily on transient than group business.
Asad Ahmed, senior vice president, Americas commercial services, Hyatt Hotel Corp., said in an email interview that overall demand is looking "strong, resilient and diversified for 2024."
Hyatt expects leisure travel will continue to perform above 2019 levels, and group and business transient will return in full force in 2024.
As of third quarter 2023, Hyatt is 90% recovered on the business transient side.
"While leisure travel continues to perform well as consumers prioritize in-person experiences, group business in 2024 is also pacing above 2019 levels and business transient is nearly fully recovered," Ahmed said.
Larry Spelts, who was president of Indigo Road Hospitality's lodging and lifestyle division until December 2023, said demand in 2024 will be a mix across the board for Indigo Road's hotels.
Indigo Road currently has three open and operating hotels in heavy leisure destinations, including the Snowbird Lodge in Robbinsville, North Carolina; Skyline Lodge in Highlands, North Carolina; and Bridge Creek Inn in Clayton, Georgia.
Eight additional hotels are currently under development. Four of them will open by May 2024, including two urban city-center locations.
"They'll have more diverse segments. In particular, we have [a hotel] in downtown Asheville, North Carolina, that will certainly have quite a bit of opportunity for hosting corporate and association groups and having business transient as well as the leisure," he said. "The one common thread is that all these hotels are independent, and they're very experience and lifestyle-driven boutique hotels."
Leisure Demand Trends
Sams said many travelers in 2023 returned to destinations such as the Caribbean and Europe for vacations.
But he predicts that could revert in 2024 and people will keep their leisure trips within the States.
"I think what you'll find with some of the political and some of the global conflicts that are happening right now, if anything that increases the likelihood that you might see more leisure travel stay home next year," he said. "I think people wanted to get beyond the U.S. border [in the past year] but our trends are that we're going to see more of that travel stay in the States and provide us with an opportunity to capture that demand."
Davidson is already noticing an increase in inbound international travel from Asia Pacific in first quarter 2024, specifically in markets such as California, New York and Florida.
Ahmed expects demand for travel to Europe to continue in 2024. However, Hyatt is also seeing increased interest in destinations such as Cancun and other all-inclusive cities throughout Latin America and the Caribbean.
During summer 2023, Spelts said Indigo Road's hotels felt the effects of many travelers taking trips abroad. However, once October hit, demand rebounded to a point where it was the only month in 2023 that was up over 2022 for the company's hotels.
"I think that's just because the travel itch got scratched during the summer season, and the U.S. traveler was going domestic again. I am convinced, based on some of the information coming out from the Federal Reserve regarding the depletion of U.S. consumer savings, the record amount of credit card debt, that is going to result in another boom year for our properties. We're going to see from the moderately affluent up through the high-net-worth traveler go back to [their] favorite domestic destination this year," he said.
Green said when examining arrivals at one of his hotels, he realized Thursday is the new Friday.
"I think we've known that for a while, but the arrival and departure patterns are changing. It used to be Friday [arrivals] for leisure. Now, you're seeing Thursday afternoon [arrivals]. Not huge, but a little more Thursday afternoons," he said. "And you're seeing a lot more Wednesday evening and Thursday morning [departures] on business travel instead of Thursday evening out."
Green said there's also a shift in chain scale demand. Extended-stay hotels, he said, are moderating while there's an increase in upscale and upper-upscale hotels with meeting space.