NASHVILLE, Tennessee — For hotel revenue strategy, data is what informs decisions and fuels forecasts. What's as important then is reviewing how everything played out.
During the opening session of the Hotel Data Conference, hotel executives shared their perspectives on the new U.S. hotel forecast and how their companies' respective performances are lining up.
Heading into the FIFA World Cup matches, Pyramid Global Hospitality took a conservative approach with its hotels in host cities, said the company's Chief Commercial Officer Brian Berry. It hosted some teams and had some good room blocks, and the company was correct to expect it to be a rate-driven event.
There were a few areas where Pyramid was wrong, though, Berry said. It underestimated the hotel demand and revenue per available room growth seen so far this year. It also underestimated how non-World Cup cities would perform, notably Chicago which had over 20% RevPAR growth.
“In fact, when you look in June alone, 12 of the top 14 occupancy growth markets were not World Cup markets,” he said.
There was an inflection point in February when hotel demand and RevPAR shifted in a way no one anticipated, Berry said.
“That’s a long way of saying we’re equally uncertain about next year, but I think the forecast feels right, for lack of a more scientific term,” he said.
Paul Coury, founder and CEO of Coury Hospitality, said what stands out to him is the resiliency of the U.S. economy. The last two years have been full of curveballs, but his company has exceeded its forecasts. Primarily within Coury Hospitality’s lifestyle side, its hotels are averaging almost 10% RevPAR growth and about 4% in its other hotels.
Guest spending on property was up, so the hotels' revenue per occupied room looks good, and that helps overall revenue, Coury said. The company's hotels are also seeing increased demand domestically on weekends.
“The baby boomers definitely are driving that — and people that are chasing experiential properties,” he said.
Aimbridge Hospitality has seen some significant growth that matches the new forecast, said Chris Dickinson, divisional vice president of revenue strategy for the company's select-service group. Of Aimbridge's 700 comparable hotels, about 70% of them are growing RevPAR, 70% are growing rate and 56% are growing occupancy.
“We’re seeing what we expected, and I think it’s going to come down to what’s happening outside of the World Cup markets,” he said. “Because strength there has been probably a little more unexpected.”
The recovery of business travel is still a bit of a question mark, but it is growing all the time, Dickinson said. The same is true for group demand. Aimbridge has been leveraging that demand to do some segment shifting.
“We’re seeing a lot of strength in retail, and we’re replacing discount business with higher-rated groups,” he said. “So, really positive shifts, and I think that’s going to continue into this year.”
Pyramid is seeing good strength across corporate travel, both for individuals and groups, Berry said. Year-to-date lead volume for groups is up 10%, and internal forward-looking metrics are underscoring confidence.
Since the Great Recession, Berry said he never bets against consumer spending, but there are some signs of weakening in the leisure segments. The last four weeks of U.S. hotel data has shown weekend occupancy growth trailing weekday occupancy growth.
“It’s still strong, but we’re starting to see that segment soften,” he said. “I think all of the headwinds — inflation, gas prices, the jobs numbers — I think all of that adds up. I don’t think it’s going to turn south, but it’s certainly not going to have the same rate growth that we’re seeing across other segments.”
Marking the calendar
When looking for hotel demand compression opportunities, a lot of them come from convention calendars, Dickinson said. Aimbridge is monitoring where it can expect significant shifts. Concerts provide similar opportunities. One lesson from the World Cup is that there will be ancillary demand around major events, such as the matches in Miami that led to more people going to Fort Lauderdale, Orlando and the Space Coast.
“While that specific demand is not going to be there next year, I think it did call attention to the fact that there's additional opportunity around that,” he said.
Coury Hospitality has three hotels in downtown Oklahoma City, home of the Oklahoma City Thunder basketball team, which made it to the conference finals in this year’s NBA playoffs.
“You don’t budget that they’re going to win everything or not win everything, so that gets kind of fun,” Coury said. “But you do look for drivers that you can maximize and try to due revenue management around that strategy.”
Beyond that, Coury said his hotels try to create their own events, including programming a lot of music on a regular basis to drive people to the hotels to be more consistent in protecting revenue.
In this experiential consumer-driven economy, concerts have become enormous events, Berry said. K-pop group BTS is coming to New York and Las Vegas. There’s a heavy metal trio of concerts this year with Iron Maiden, Mötley Crüe and Metallica. Rush and AC/DC are also performing. Harry Styles is in New York, and Lady Gaga is in Los Angeles. Anyone with exposure to Puerto Rico knows the tourism effects Bad Bunny had with his residency last year.
“They’re becoming just mega events and mega demand drivers that people are willing to travel, stay in hotels and generate demand for us, so we watch those very carefully,” he said.
Anyone that works in a hotel or has a hotel in an urban market knows a certain number: how big a citywide convention needs to be, either in attendees or rooms booked, in order for a hotel to participate in the room block or feel some of that compression, Berry said. Each market, of course, is a different number.
Setting rate
Rate follows hotel demand, meaning where demand is growing, rate tends to follow, Berry said. Across hotel chain scales or classes, there’s a 70% to 80% correction between demand growth and rate growth.
“We really pay attention to the drivers of demand as an indicator of where rate growth is going to be,” he said.
There has been some decoupling of historically good indicators of demand growth, namely gross domestic product increasing last year while RevPAR declined, Berry said. Based on consumer metrics and current confidence levels, all the signs point to consumer spending being weak while it’s actually been strong.
Similarly, the metrics that drive hoteliers’ understanding of business travel demand has been affected by non-residential fixed income spending going into AI data centers, he said. That’s different than how those dollars would have been spent historically.
“It becomes more difficult for us to draw a line between an indicator and the effect on demand and, therefore, the effect on rate,” he said.
This is where the value of demand becomes more important than the volume of demand, Dickinson said. Aimbridge’s teams are contributing to margin expansion through maximizing ADR from segment shifts and often just confidence in the rates they’re setting.
General managers are also able to execute on day of arrival in the short-term window, something that has become more competitive in recent years, he said. Aimbridge also created a scorecard so everyone understand how they contribute to margin expansion, and that has reduced a lot of the noise.
“If we're not having conversations around that, then we've got to challenge ourselves on should we shift it to something more meaningful,” Dickinson said.