Luxury hotels across the U.S. are eager to welcome back guests as more vaccines are distributed and travelers expect that long-envisioned trips may finally come to fruition this year. The luxury hotel sector was severely affected last April when average occupancy declined to only 9% after the pandemic struck.
That figure has since recovered to 27% and should continue to rise. As travel bans and restrictions took hold, many hotels took rooms offline or even closed properties completely. In January of this year, 13% of luxury hotel rooms still were closed.
However, the positive news around vaccine availability and some forward-looking data has begun to instill a sense of hope for hoteliers as travelers plan their summer vacations and cumulative household savings continue to increase.
Despite the combination of expected demand and available cash, STR, CoStar's hospitality analytics firm, expects that luxury hotel room rates for this year will still be over 10% below the year-end 2019 results. Pricing power for hotels is a direct function of higher occupancies and is expected to take a while to materialize.
The expectation of a rebound in high-end leisure travel has manifested itself in two recent property deals in Las Vegas, long a favorite destination for incentive groups and leisure travelers.
The real estate arm of Koch Industries stepped in to resurrect The Drew, a new casino-hotel under construction on the Las Vegas Strip with nearly 4,000 rooms. It was first conceived as “The Fontainebleau” in 2005, and after several stops and starts, noticeably involving financier Carl Icahn for a short stretch, it will now be renamed The Fontainebleau, again.
In a separate transaction, Apollo Management took over the operations of The Venetian, The Palazzo and the Sands Expo Convention Center from Las Vegas Sands for over $2 billion. Vici Properties purchased the real estate and related assets for $4 billion. Las Vegas Sands is planning to focus on its operations in Asia.