Hotel metric performance in the first quarter was softer for some companies due to tough year-over-year comparisons, unfavorable weather patterns in ski-focused and wine country markets, and more inexpensive flights to Mexico and the Caribbean. However, executives are encouraged by the demand outlook for the remainder of the year.
During first-quarter 2024 earnings conference calls, hotel industry executives said middle-income travelers are more employed today and earn wages that are higher than pre-pandemic levels. At the same time, affluent travelers aren't slowing down either.
Pre-pandemic, the leisure segment for some companies was their most rate-sensitive segment, but many notice today that guests who are traveling for leisure are less concerned about the price.
"I think the entire industry has benefited from that segment being less price-sensitive. It has always been our thought that over time, we would revert towards more normal behavior with a greater ability to drive rate with our corporate customers as we achieved stronger occupancies midweek, and the ability to drive rate with leisure customers around compression nights in markets where demand was strong," said Justin Knight, CEO, Apple Hospitality REIT. "We are assessing what we're seeing right now."
For many companies, leisure travel has been resilient year to date through April, and an ongoing strength in group business is shown through stronger booking pace in key markets such as Nashville, New Orleans and San Antonio.
For more commentary on first-quarter performance and demand outlook across various publicly traded hotel companies and real estate investment trusts, read below.
Bryan Giglia, CEO, Sunstone Hotel Investors
"As we look ahead into 2024, we are encouraged about the outlook for the year, which benefits from our recent investments and begins to pave the way for the next layer of growth in the portfolio. Comparable portfolio group room revenue pace for the rest of the year is up approximately 9% with broad-based strength across Boston, D.C., Orlando, Long Beach and Wailea. Transient booking patterns remain short term, but the recent week-over-week pickup from May and June is exceeding that of last year.
"While it remains early, we are encouraged by what we are seeing in our group booking activity for 2025 with improving convention and citywide calendars in many of our markets. ... We were very pleased to close our acquisition in San Antonio last month."
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"While we cannot control when leisure demand will accelerate, we can continue to work with the resorts to build a base of group business and control costs so that we can maximize profitability when it does.
"Our efforts are showing in stronger bookings at these resorts with group room nights pacing nearly 13% higher for the remaining quarters of 2024. We knew coming into the year that the first few months would have challenged top-line growth."
Geoff Ballotti, President and CEO, Wyndham Hotels & Resorts
“What we're seeing is that middle-income guest is more employed. We look at their wages and their savings. They're higher than they were back in pre-COVID levels. Their home prices are up, their stocks are up, their deposit levels are stable and they're in good shape.
“We look at consumer confidence, that's obviously growing. If you look at the monthly inside report, I think consumer sentiment is up significantly from 65% to close to 80% from last March to this March. We look at length of stay, and we are continuing to see longer lengths of stay by a couple hundred basis points versus where they were before things slowed.
“Booking windows we look at daily, and they continue to tick up. We talked about our trends, looking out to Memorial Day weekend and into May. But our booking windows are similarly up 7% to last year from 19 to 21 days now. Cancellation rates are steady, and drive-to, which is about 90% of our domestic demand, continues to chug along. People are driving further than they were pre-COVID, and we think it'll continue to be the No. 1 vacation preference this summer.”
Michele Allen, Chief Financial Officer, Wyndham Hotels & Resorts
“Cruise and inexpensive air travel to destinations like Mexico and the Caribbean opened back up while domestic leisure and drive-to hotels experienced demand declines, especially along the coast.”
Chris Nassetta, President and CEO, Hilton
“As we look to the rest of the year, we continue to expect systemwide RevPAR growth of 2% to 4%, with the U.S. towards the low end of the range and continued strength in international markets. We expect positive RevPAR growth across all major segments, led by group performance at or above the high end of the range, business transient around the midpoint and leisure transient towards the lower end of the range. For the full year, group position is up 13% versus last year.”
Jeff Donnelly, CEO, DiamondRock Hospitality Group
"Looking ahead, we believe our resorts are positioned to deliver better results in the second half of 2024. The difficult comparisons in South Florida and the Keys have been lapped, and we expect the remaining resort markets will follow suit by the end of the year. We recognize high interest rates and inflation are placing pressure on consumer spending, but these same pressures should drive incremental preference for domestic travel over international travel and drive-to destinations over fly-to destinations."
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"We are most positive on the group outlook for 2024. We believe our strong volume of business on the books is a competitive advantage. At the end of the quarter, we had 85% of our budgeted full-year group revenue on the books, representing a 14% increase over the same point in 2023.
"Looking at the quarterly breakdown, our group revenue was up 10% in [the first quarter] and pace is up approximately 5% in [the second quarter] and over 15% in the third and fourth quarters.
"Looking at just our big-box hotels, our group pace for 2024 is up 16% or about 200 basis points better than our total portfolio. The most notable performers of our Renaissance Worthington, up 32%, the Hythe, up over 25%, Chicago-Marriott, up 22%, the Westin Fort Lauderdale, up 19%; and Washington, D.C., up 15%.
"Looking ahead to next year, at the end of [the first quarter], our big-box room-night pace for 2025 is flat with 2024 with time to go."
Jon Bortz, Chairman and CEO, Pebblebrook Hotel Trust
“We also continue to be encouraged by our current group in total pace. Our group pace for quarters two through four shows group room nights ahead of the same time last year by 8.5% and group revenue ahead by 10.2%. With transient revenue pace up by 3.9%, our total room-night pace is ahead by 7.9%, and our total revenue pace on the books is ahead by 7.1%. [The third quarter] continues to represent the quarter with the largest pace advantage followed by [the fourth quarter] on a percentage basis. Nevertheless, given the slower in the month for the month and in the quarter for the quarter booking trends we've been experiencing, we remain cautious about the second half due to this normalization of the group booking window as well as the softening macroeconomic environment.”
Tony Capuano, President and CEO, Marriott International
“Once again, we saw RevPAR growth across all three of our customer segments, group, leisure transient and business transient. Group, which comprised 24% of global room nights in the first quarter, was again the strongest customer segment. Compared to the year-ago quarter, group RevPAR rose 6% globally. Full-year 2024 worldwide group revenues were pacing up 9% year over year at the end of the first quarter, with a 5% increase in room nights and a 4% rise in average daily rate. Leisure transient accounted for 42% of worldwide room nights in the quarter. Globally, both leisure demand and ADR growth have remained remarkably resilient, driving leisure RevPAR up 4% year over year. Business transient, which contributed the remaining 34% of global room nights in the first quarter, had a 1% increase in RevPAR.”
Sourav Ghosh, Executive Vice President and Chief Financial Officer, Host Hotels & Resorts
"We are still outside the primary booking window for July Fourth, but thus far, we are encouraged by strong bookings in San Diego, Houston and New York. Business-transient revenue per available room was 5% above the first quarter of 2023 driven by an increase in rate and room nights as business-transient demand continued its slow and steady recovery. Seattle, Boston and San Francisco led room-night growth, and both New York and Boston are within 2% of pre-pandemic demand.
"Turning to group. Revenue per available room was up 4% in the first quarter, driven by room-night growth in San Diego, San Francisco, Orlando and Maui. Notably, group room-night volume reached 96% of the first quarter of 2019 levels, led by corporate and SMERF [social, military, education, religious and fraternal] groups.
"For full-year 2024, we have 3.6 million definite group room nights on the books, representing a 17% increase since the fourth quarter and putting us ahead of same time last year. Group rate on the books is up 4%, and total group revenue pace is up 7% over the same time last year.
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"We continue to be encouraged by the ongoing strength of group business as evidenced by strong pace, [lingering] booking windows and double-digit citywide room night pace in key markets such as Nashville, New Orleans, San Antonio, Seattle and Washington, D.C.
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"Turning to our revised outlook for 2024. The midpoint of our guidance continues to contemplate steady demand in travel and low supply growth.
Our expectations for the year are driven by improvements in group business, a gradual recovery in business transient, softer short-term leisure transient demand and a continued evolution of demand on Maui as the island recovers from the recent wildfires. At the low end, we have assumed slow group pickup and softer leisure transient demand. And at the high end, we have assumed a faster recovery at our Maui resorts and increased group pickup."
Jim Risoleo, President and CEO, Host Hotels & Resorts
"We're not seeing a real slowdown in the affluent customer. There has been a rotation that we talked about last year with respect to an international inbound versus international outbound imbalance. That is still occurring. I think over time that will right itself and correct itself.
"I think going back to Orlando for a moment, the Four Seasons in the quarter, we've had an ADR of over $2,000. So people ... still want to go to Orlando, they still want to stay at the Four Seasons. And what we have working against us a bit is a strong dollar. It's not weakening. It will likely weaken once rates start to come down, and that's keeping the international traveler away from the United States right now. I mean there was a fairly significant uptick in the first quarter.
"As we all try to wrap our head around the soft leisure demand — we talked a lot about weather in three states: Arizona, Florida and California, and it was meaningful. I mean we lost group business at the [Phoenician] over the course of the Waste Management Open because of the rains.
"Now we dug into this a little more. And we tried to answer the question, where do these people go? I mean the demand didn't just disappear. People just stay home. We found out that as an example, the international outbound to the Caribbean in the first quarter was 135% of where it was in 2019 levels and RevPAR in the Caribbean was up 17%.
"So it's just a longer way of saying that our belief is that the consumer, the affluent consumer, is still healthy. They're still spending money. They're still prioritizing experiences over goods. And we're just not seeing the reset back."
Justin Knight, CEO, Apple Hospitality REIT
"We've commented for some time that pre-pandemic, leisure was our most rate-sensitive segment. And we've been incredibly pleased, and I think the entire industry has benefited from that segment being less price-sensitive. It has always been our thought that over time, we would revert towards more normal behavior with a greater ability to drive rate with our corporate customers as we achieved stronger occupancies midweek, and ability to drive rate with leisure customers around compression nights in markets where demand was strong.
"We are assessing what we're seeing right now. And as I highlighted, there is some variance from market to market. What we've seen overall is to the extent there has been a pullback in some markets on weekends from an occupancy standpoint. It's been largely offset or more than wholly offset by a pickup in midweek business. And that's a trend we feel very comfortable with. When we look at overall profitability of our business and how we historically split business between business travelers and leisure, reversion to more normal behavior with stronger performance midweek would, from an overall profitability standpoint, be a favorable shift for us."
Liz Perkins, Senior Vice President and Chief Financial Officer, Apple Hospitality REIT
"Looking day-over-day, leisure travel has been relatively resilient year to date through April. While weekend occupancies were down over 2% for the first quarter compared to the first quarter 2023, this was driven mostly by the declines in March related to the unfavorable calendar shift and we saw a rebound in April with weekend occupancies up over 5%. Weekday occupancies were flat for the first quarter with the negative drag from the Easter holiday. Business travel continued to improve steadily in April with weekday occupancies up over 2%, led by improvement on Monday, Tuesday and Wednesday nights.
"We have been pleased to see steady improvement in midweek occupancies, an area where we continue to have meaningful upside relative to pre-pandemic levels. And weekend occupancies have remained relatively stable, indicative of continued strength in leisure demand.
"Forward bookings remained strong, and we are optimistic that increased occupancy in the second and third quarters will better position us to drive incremental rate growth."
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"We were pleased with April overall when we look at the day-of-week trends for the full month, seeing growth in both weekday and weekend occupancies and RevPAR, it was heavily weighted, particularly from a growth rate perspective on the first two weeks of the month. But as we round it out towards the end and potentially had cleaner weeks to look at, we saw continued strength in midweek demand. And one of the trends I think that we may see and may be experiencing is some normalization between a pickup in midweek, potentially offsetting some leisure on the weekend. When we look year to date, we're slightly positive driven by that midweek demand and some weak softening on the leisure side. But overall, the midweek growth is resulting in a positive result."
Editor’s note: Chris Nassetta serves on the board of directors for Hotel News Now’s parent company, CoStar Group.