To the untrained eye, hotel group demand in the U.S. over the past year or so appears to be floundering. But actually, according to STR data, there's just been a bit of displacement.
STR Senior Analyst Hannah Smith said on a recent episode of the CoStar News Hotels podcast that she looked at group demand in 2025, and then broke down the data based on market size. She pulled the larger markets, such as San Diego, Chicago, Phoenix and Miami, and compared them to smaller ones, like Birmingham, Alabama; Tucson, Arizona; Jacksonville, Florida; and Wisconsin Dells, Wisconsin.
"We saw a pretty clear trend in 2025 where these small markets were up over 3% in group demand, the large markets down about 1.5% in group demand. So, there was a pretty clear split," she said. "And if you look at that longer-term trend, it really was around 2025 that we saw this split where those smaller markets started to do a little bit better and the larger markets started to retreat a little bit."
She said the trend has continued into 2026, though it's not as stark. However, any amount of group demand growth "is certainly notable just because of what we're seeing at the broader market level."
Smith said, based on some anecdotal information from hoteliers, that groups have been more attracted to smaller spaces and markets, contrasting the years immediately following the pandemic when they wanted to spread out and properly social distance.
Now, groups seem to be seeking smaller spaces and markets where, instead of being one of several groups at the hotel, they could be the only large party.
"So if [a group] can be in a smaller market and everybody downtown is part of this group, they really feel like they are the only ones in the market and they can really activate the whole market and that whole downtown area, that may be appealing to some groups," she said. "Yeah, sure, they could go to Chicago and take up a decent amount of meeting space, but they'll just feel like another group of many in that market."
She added that booking in a smaller market provides a little bit more intimacy and flexibility. Price, however, isn't a factor. Smith said she thought smaller markets might be priced more competitively, but it's the opposite. Average daily rate for groups in the smaller markets is actually more expensive on average than the larger markets.
"Pre-COVID 2019, the small and large market buckets, they were actually sitting around the same group ADR. It was around $210 to $215 in ADR. Since then, small markets are up 42% in group ADR. They're just under $300," she said, adding that group ADR for larger markets is only up 23% since 2019.
"Groups aren't just choosing the cheapest markets, they're actually willing to pay a premium in some cases for these smaller markets," she said.
The forthcoming FIFA World Cup will factor into this trend, Smith said, so she'll be keeping a close eye on that and what continues to happen with pricing.
For more from STR's Hannah Smith about group demand trends, listen to the podcast embedded above.