Hotel execs tout improved performance of urban markets during first quarter

Though many of the headlines for first-quarter hotel performance focused on concerns over softening demand and lowered 2025 outlooks, one of the bright spots during the first quarter was improved performance of hotels in urban locations.

Speaking during their companies' earnings calls, executives at hotel real estate investment trusts went into detail about local conditions and performance of hotel markets across the U.S., pointing to stronger citywide event calendars and business transient demand. Maui and Los Angeles also received attention for how the markets have recovered following their respective wildfires in 2023 and early 2025.

"Turning to business mix. RevPAR growth in the first quarter was better than expected, driven by increases in room rates. We saw particularly strong performance in Washington, D.C., New York, New Orleans, Los Angeles and Maui. Transient RevPAR grew by 6%, driven by resorts which benefited from a late Easter.

"Our three Maui Resorts accounted for almost half of the transient RevPAR growth in the quarter, alongside strong performance in New York and Los Angeles.

"Digging deeper into Maui, the leisure transient recovery continued, driving Maui's strong results in the first quarter. Transient rooms sold were up approximately 70% year over year. Growth in revenues from transient guests more than offset declines from tough group comparisons in the first quarter of 2024, which included revenue from recovery and relief groups as well as elevated group cancellation revenue. Maui's 16% RevPAR growth in the first quarter provided a 70 basis point benefit to portfolio RevPAR growth. Total RevPAR at our three Maui resorts was also up nearly 7% due to strong outlet growth and increases in golf and spa revenue, despite collecting $8 million in attrition and cancellation revenue last year. Taken together, we are encouraged that the recovery is well underway in Maui."

"Los Angeles had an especially tough quarter as expected. The fires and the aftermath significantly reduced demand from both leisure and business travelers, group and transient. Displaced homeowners and first responders provided only a very brief lift during the week of the fires and only a minor benefit thereafter. RevPAR for our nine West Los Angeles properties declined 23.4% in [the first quarter] with occupancy down 18% and rate down 6.5%.

"While the Hyatt Centric renovation contributed modestly to the negative impact, the vast majority was directly related to the fires. All nine of our LA properties had negative RevPAR, and they represented seven of our eight worst-performing properties in the quarter. EBITDA for our LA properties declined by $5.7 million or 72.6% compared to last year, a very challenging quarter and quite a drag on the entire portfolio, yet not quite as bad as we were forecasting.

"Business and leisure travelers to LA have been gradually returning as we've moved further away from the fires and the initial misperceptions about widespread damage to LA and its amenities and visitor attractions. We're still forecasting a negative EBITDA impact in the second quarter, but the good news is, we now expect it to be around $1.5 million, or about $1 million less severe than we forecasted 60 days ago. However, we do expect some lingering price competition through the summer that could modestly pressure results in the third quarter."

"Looking at individual markets, Washington, D.C. delivered a healthy performance, posting a 14.7% RevPAR increase, benefiting from the inauguration-related activities in January. San Francisco also performed exceptionally well with RevPAR up 13%, thanks to strong business group and transient travel, with further recovery in leisure travel and an improved convention calendar. The nearly 10 percentage point jump in occupancy in San Francisco is especially encouraging, considering the [first-quarter] convention calendar was only slightly ahead of last year.

"With the convention calendar up nearly 70% for the full year, we're poised for a strong lift in demand throughout the year, especially in the fourth quarter. This positive momentum in San Francisco is also being supported by the new mayor's aggressive focus on crime reduction, increasing safety and cleanliness, activating the city, more effectively treating homelessness and mental health, and implementing business-friendly policies. We're also extremely pleased with the new leadership at SF Travel, which has already been successful in driving stronger convention calendars for 2026 and 2027.

"Portland achieved solid results as well with RevPAR rising 7.5%, fueled by an 8-point gain in occupancy as the market continues to recover. Chicago delivered another strong showing in its recovery with RevPAR growth of 7.1%, and Key West rose 4.7%, driven by both rate and occupancy gains, a positive sign amid broader concerns around consumer spending and softening international travel demand, particularly from Canadian travelers."

“We were very pleased to see broad-based strength in several of our core markets with Miami; New Orleans; Puerto Rico; Washington, D.C; and San Francisco reporting above industry average.

“You've got 74 million visitors plus or minus into Orlando. You have obviously Epic, where Universal’s put in $6 billion or more, I think, is the publicly disclosed number, the excitement around that, the first park to open in decades. We've also got Disney coming on the heels, talking about another $60 billion plus or minus. Now, I'm not sure all that's theme park, that's going to be some ships. But with that kind of backdrop, and given it's a strong, strong hub for convention as well, we are very, very bullish on Orlando, Bonnet Creek in particular. Given the additional meeting space that we added in both the Waldorf as well as the Signia, we have the ability to be able to layer in groups that we didn't have the ability before.

“Turning to Hawaii, RevPAR across our two properties declined by 15% during the quarter, as our Hilton Hawaii Village Hotel continues to ramp up following the labor strike in [the fourth quarter]. Marginally softer inbound travel from abroad also weighed on results, with arrivals from Japan down 6% and Canada down 1.5%. However, we were very encouraged that U.S. domestic visitation remained flat year over year, supported by increased airlift from major U.S. carriers, including new domestic routes into Honolulu announced by both Delta and American earlier this year, which continues to drive healthy inbound travel from the mainland.

“The long-term outlook for Hawaii remains very favorable, supported by limited new supply expected through at least 2029 and the anticipated improvement of inbound travel from Japan as the dollar-yen exchange rate normalizes. Hawaii is one of the most dynamic and resilient resort markets in the country, with over 3,500 fee-simple guestrooms and a huge discount to replacement cost. Park remains well-positioned to deliver above-average long term growth for shareholders.

“New York [is] one of the great cities of the world, as we all know. And there's no doubt, when you think about the frustration, the energy around the tariffs right now, there’s going to be some. Obviously, we saw a little bit of decline in the Japanese coming into Hawaii. That's still ramping up, but still, certainly still a little over 50% below where we were in 2019.”

"The primary driver for our first-quarter performance was the strength in our urban hotels, which achieved robust RevPAR growth of 3.6%, with a number of our urban markets achieving high single-digit growth or higher. Despite the macro noise, urban hotels have continued to outperform the broader industry, benefiting from all segments of demand, especially from business travel that is being bolstered by workers returning to offices and large events continuing to draw high attendance. This was demonstrated by our weekday urban RevPAR, which grew by 4.9% during the quarter.

"Additionally, we are encouraged to see the recovery in Northern California gaining momentum, supported by a stronger citywide calendar and the improving business climate."

"Overall, our RevPAR growth remained healthy in urban markets, such as Washington D.C. and New Orleans, which benefited from special events during the quarter. A number of our urban markets achieved strong RevPAR growth during the first quarter, including San Jose at 14.1%, Houston [central business district] at 9.9%, Philadelphia at 26.4%, Pittsburgh at 12.6% and Louisville at 10.3%. We saw growth in all of our segments with group being the strongest, which saw demand increase by 9%, leading to 10% revenue growth above the first quarter of 2024. Total revenue growth was 1.2% and benefited from 3.8% growth in out-of-room spend."

"I think Denver is showing some significant strength for us just given the citywide pace that's on the books, actually for a hotel downtown; we don't participate in a lot of those blocks. So the citywide pace is great for a little hotel that can compress around it. Salt Lake is also kind of a significant standout for us.

"I think we're finally seeing the benefit of the renovation that we did about 1.5 years ago in San Diego also just partly driven by the fact that we had some displacement from a renovation last year, but we're also seeing post renovation, a nice uptick in group bookings."

“Our Houston properties grew RevPAR almost 8% during the quarter, benefiting from a strong convention calendar and market-wide corporate expansion and job growth as well as an easier year-over-year renovation comp at our West/Energy Residence Inn. Our Los Angeles hotels grew RevPAR over 20% with fire recovery business bolstering the performance early in the quarter. The Super Bowl benefited our New Orleans hotel, which also saw over 20% growth during the quarter. … Our hotels in Salt Lake City performed incredibly well during the quarter, achieving almost 10% RevPAR growth despite a softer ski season and renovation displacement in one of our hotels.”

"Urban markets delivering outsized growth include New Orleans, Tampa, San Francisco, Chicago and Downtown Houston, all of which experienced first quarter RevPAR growth of 7% or higher. San Francisco, in particular, outperformed in the first quarter with RevPAR growth of 13.5%, driven by a successful JPMorgan Healthcare Conference in addition to multiple other citywide events. This enabled our hotels to maximize compression opportunities, driving a 550-basis-point outperformance to first quarter San Francisco MSA RevPAR growth of approximately 8%.

"Looking ahead, San Francisco is positioned for another strong quarter as convention pace is up over 30% in the second quarter. Strength in group also applied to our urban hotel portfolio broadly, for which group RevPAR increased 17% versus the first quarter of 2024 and over 30% relative to January and February 2024. The performance of our urban portfolio in the first quarter gives us strong conviction that Summit is well-positioned to outperform as the macro environment normalizes. Today, urban hotels comprise approximately 48% of our total guest room count. The company's suburban and small town metro portfolios generated average RevPAR growth of 1.2% in the first quarter, driven by our hotels in Portland, Hillsboro, Greenville, North Dallas, Frisco and Southern California.

"We have invested significant capital into renovating many of our suburban and small town metro assets over the past 24 months and expect strong relative future performance, assuming normalized conditions. Today, suburban and small town metro hotels comprise approximately 29% of our total guest room count. Summit's exposure to the resort location type accounts for only 11% of total guestrooms."

"Our performance in San Francisco is encouraging as we have meaningful opportunity for additional earnings recovery there as growth in the city has lagged other major markets, but has an increasingly positive outlook for the coming years.

"After having a great 2024, trends in Boston remained strong into the first quarter with solid performance at our well-located Marriott [Boston] Long Wharf. The better-than-expected performance in most of our urban and convention markets was partially offset by more subdued market-wide transient demand in San Diego.

"While first-quarter results in San Diego were less robust, the outlook for the remainder of the year is more encouraging with solid growth expected in the second quarter, followed by the recapture of lost business from the labor activity that occurred in the third and fourth quarters of last year."

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