NEW YORK — Guest booking behavior has been in flux since the start of the pandemic and through the recovery, and hoteliers are trying to keep up.
During a meeting of the Lodging Industry Investment Council, hotel industry experts shared how leisure and group travelers' newer booking window preferences and rate sensitivity are affecting hotel performance.
Transient booking pace and the booking windows have shortened to the point where much of the business is in the week for the week, said Jonathan Falik, founder and CEO of JF Capital Advisors. If there’s no group base, it’s difficult to figure out how to staff and revenue-manage a hotel properly.
“That’s one of the trickiest parts about the industry right now, that the business is showing up but no one’s booking in advance,” he said.
A year ago, meeting planners were trying to get organized but didn’t have the authority to sign contracts, Falik said. That resulted in a lot of negotiated but unsigned deals. That uncertainty has faded, but much of the business coming in is still within a shorter window.
Small group meetings have been great demand drivers in the past couple of years, but those also have shorter lead times than are expected for a large convention booking, said Mark Wang, senior vice president of acquisitions and business development at Davidson Hospitality Group.
“The demand into the hotel seems to be short booking windows, and that can lead to short-term cancellations,” he said. “You’re not going to be able to fill that on short notice most of the time.”
Davidson is expecting strong summer demand for its hotels, Wang said. The second quarter was a little slower compared to last year while the first quarter was much stronger. In leisure resort markets, the demand has been lighter than a year ago, but the third quarter is expected to be similar to 2022.
Through the second quarter, Raines has been pacing about 8% off the previous year, said Kerry Ranson, president of operations and partner at Raines. It’s about 2% to 2.5% up in its budgeted forecast, and the summer is pacing more than 9% over last year’s budget.
“We went strong in the summer, expecting and trying to hold some of that stuff, and we’re actually pacing a little bit below our summer budgets currently, so still up over last year,” he said, adding the growth has been rate-driven as occupancy has been steady.
Ranson said he’s concerned about hitting a rate ceiling, especially heading into the third quarter.
One factor that could play into hotel pricing is the high cost of flights, Falik said. The cost for an entire family to fly to a destination is going to cut into vacation budgets, so that may mean finding a less expensive hotel or cutting the trip short by a few days.
During the pandemic, hotels had this artificial stimulus for demand, he said. There was more remote work, and kids were likely doing remote schooling. International travel was shut down, the cruise lines were closed, and domestic hotels began to reopen across different price points.
“We had people that amassed the biggest number of unused sick days and unused vacation days because you could drive to Myrtle Beach, dial into your two-, three-hours-worth of necessary calls or meetings, shut your laptop and go to the beach with your family,” he said.
Midweek leisure transient business has dipped but isn’t completely gone in terms of occupancy, Wang said. That lower occupancy has been supplemented by groups.
“But the group business that’s coming in a midweek role isn’t paying the same as the on-fire transient guests are paying us,” he said.
At the same time, while total revenue per occupied room is down slightly, the total revenue per occupied room is up meaningfully, Wang said.
“We’ve lost some of that rate, but the amount of revenue that we’re generating per occupied room has gone up,” he said.