The hotel and lodging industry is performing better than it ever has, said Carter Wilson, director of Smith Travel Research Analytics. The Great Recession hit the hotel industry hard, but hospitality companies have come roaring back.
With the hotel industry booming and new hotel construction only now starting to resume, the higher demand means higher occupancy, which means higher rates, and that could mean challenges for the group market. Groups may be priced out of top-25 markets, gateway cities such as New York, Boston and Miami. For example, San Francisco is at 85 percent occupancy for the entire market and doesn’t have many new hotels coming in, Wilson said. Combine that with the fact that October is a big month for the city, and “we’re expecting to see substantial rate increases in October,” he said. The natural progression is for group travel to look at outlying markets, which “may not be quite as strong, but even those are hopping.
“Those groups are still going to be able to find availability, but they’re going to have to look further and further out to do that,” Wilson said.
Group demand has been slower to recover following the Great Recession, but it’s making a comeback. It wasn’t until early last year that we started to “see life in group,” Wilson said. June 2015 figures showed that group demand had grown 3.8 percent in the past year, outpacing “transient” travel — individual travelers, such as corporate and leisure travelers.
The average daily rate (ADR) for groups is up 3.9 percent on a 12-month average, although it’s still behind transient ADR, which is now up more than 5 percent, according to STR data. But group rates take some time to catch up because groups book several months in advance, whereas individual or transient travelers may book only a couple weeks in advance.
“You’re going to start seeing group rates increase,” Wilson said. “They’re going to start catching up to transient rates.”
Group ADR will finish the year at $182, according to Wilson. That’s above the previous peak group ADR of $173 in early 2009 but, when adjusted for inflation, below group’s previous peak of $191 in 2008.