Improving downtown office occupancy over the first four months of the year is highly correlated to improved midweek hotel occupancy. However, continuing hybrid and remote work policies appear to have created a ceiling for overall office occupancy, slowing a full recovery of midweek business travel demand.

As a result of these policies, absolute office occupancy levels are still significantly below pre-pandemic levels across four major hospitality markets analyzed for this article: New York, Washington, D.C., Boston and Chicago. However, data tracked by security firm Kastle Systems, which gathers daily office occupancy levels across 2,600 buildings in 138 cities, shows that office occupancy in these four markets has picked up meaningfully since January. Midweek transient hotel occupancy, defined as nongroup-related hotel occupancy Monday through Wednesday, has also grown significantly and has even outpaced growth in office occupancy across the four markets.

In New York City, the world's largest office market, office occupancy has grown from 14.6% in the first week of January to 37.6% at the end of April, according to Kastle Systems, with many financial institutions and media firms returning to the office. Midweek transient hotel occupancy has grown from 24% in early January to 62.4% at the end of April, driven by a strong rebound in business travel.

The correlation between office occupancy and midweek transient hotel occupancy in New York is a strong 0.92.

Office occupancy in the nation's capital has grown from 14.7% in the first week of January to 38.8% at the end of April, with demand largely driven by law firms, development and tech companies returning to the office. Midweek transient hotel occupancy also increased from 16.6% in early January to 45.1% at the end of April.

The correlation between office occupancy and midweek transient occupancy in D.C. is 0.84.

Office occupancy in Boston has increased from 27.2% in the first week of January to a healthy 55.1% at the end of April, the highest growth rate and highest absolute office occupancy across the four markets analyzed. Midweek transient hotel occupancy has seen a corresponding increase from 17.3% in early January to 50.5% at the end of April, driven by strong business transient demand from the financial services and life sciences sectors.

The correlation between office occupancy and midweek transient occupancy in Boston is an extraordinarily strong 0.94.

Chicago's office occupancy has grown from 19.5% in the first week of January to 37.3% at the end of April, the lowest increase of the four major markets analyzed. Midweek transient hotel occupancy has only modestly increased, from 13% in early January to 32.7% at the end of April. Chicago has the lowest office occupancy and lowest midweek transient hotel occupancy as its downtown core has struggled to recover following the relocation of a few major companies, and others are also reported to be considering departing.

The correlation between office occupancy and midweek transient occupancy in Chicago is 0.93.

While these four markets are experiencing higher hotel occupancy with increased office occupancy and growing midweek transient demand, it remains to be seen if office occupancy continues to trend higher or plateaus due to continuing remote and hybrid work policies. While midweek transient demand is growing at a greater velocity compared to office occupancy, a full recovery in business travel demand is expected to be further delayed and a return of midweek transient occupancy to pre-pandemic levels is unlikely given ongoing remote and hybrid work policies.

Some of this occupancy loss may be offset by monthly or quarterly employee meetings as companies seek to preserve and enhance culture via more frequent in-person interactions. However, midweek hotel demand patterns will continue to strongly correlate with the evolving nature of work post-pandemic.