Most Americans continue to prioritize travel, but some are trading down on hotel spending as they shell out more money on airfare. (Getty Images)
Hotel News Now
Source: www.costar.com, July 2023
‘Champagne Effect’ Dwindles, but Consumers Still Prioritize Travel
With summer in North America in full swing, hoteliers are keeping track of current demand trends, revamping on-property offerings and taking advantage of major citywide events.
Travel demand even before the first day of summer on June 21 was trending at a healthy clip.
National Director for Hospitality Market Analytics at CoStar Jan Freitag said that compared to 2019, daily Transportation Security Administration counts were hovering around pre-pandemic passenger records.
As of June 10, Freitag said the current daily through-put numbers are well above 2022’s counts. He said this points to continued strong demand for air travel.
Freitag added that with the increased cost of airfares, some consumers will trade down on hotel spending this summer.
However, when it comes to major citywide events such as Taylor Swift’s “Eras Tour,” there’s been seemingly no hesitancy by guests to spend more.
Derek Sumpter, general manager of Reverb by Hard Rock Downtown Atlanta, told Hotel News Now’s Trevor Simpson that rooms at his hotel sold out for the whole three-day period within two hours of Swfit’s tour being announced. During that time, rates were based on past citywide concert events.
“It felt bigger than even the Super Bowl, to be quite honest with you,” Sumpter said.
According to Fortune, the “Eras Tour” could generate $4.6 billion in consumer spending in the U.S.
Data from CoStar’s hospitality analytics firm shows Swift’s tour significantly elevated key performance metrics in the majority of cities she visited. Nashville hotels experienced the biggest jump, increasing baseline metric premiums such as occupancy by 33%, revenue per available room by 101% and average daily rate by 51%, Simpson reported.
As some markets are exploding with demand from citywide events this summer, certain destination markets such as Miami and Daytona Beach, Florida, are proving to be less popular after a successful run of demand growth since the onset of the COVID-19 pandemic.
“Gabriel Perez, regional director of lodging operations for The Indigo Road Hospitality Group, said South Florida in general is experiencing a decline in summer travel, in part due to its success over the past few years. He said Florida’s lax COVID-19 restrictions compared to the rest of the U.S. allowed the market to obtain a steady pace of business just a few months after the pandemic began in March 2020,” Simpson reported.
Island Hospitality Management planned for a decrease in summer room demand at its Florida hotels, Senior Vice President of Revenue Management Michele Mainelli said.
“I do think we expected it to scale back because it has been so strong the last three years. Now that international travel has ramped up, I think we expected it,” she said. “We didn’t budget as aggressively for the Florida properties as we had in previous years.”
According to an STR analysis, international travel to the U.S. has yet to fully recover. Comparing May 2023 to May 2019, 8% more Americans traveled abroad, but 19.6% fewer international travelers came to the U.S., data from the U.S. International Trade Administration shows.
There’s no doubt that travel remains a priority for most consumers. Now, it’s a matter of how much they’re willing to spend and for how long.
Harry Carr, senior vice president of revenue management at full-service hospitality management company Davidson Hospitality Group, said there was a “champagne effect” about a year ago at this time. That’s beginning to ebb in some markets.
This meant that “consumers were prioritizing travel above many other things, and they weren’t really concerned about the cost … regardless of the expense, [they’re] going to do it, [they’re] going to have that extra glass of champagne.”
In aggregate, Carr said Davidson’s portfolio of 84 hotels and resorts is up slightly in terms of occupancy but rate began to drop in May, especially in leisure markets such as Phoenix, Los Angeles and Charleston, South Carolina. Conversely, leisure demand has picked up for its hotels in markets such as Chicago and Minneapolis.
“Carr said consumers are no longer buying on impulse when it comes to booking travel and are willing to shop around more. This includes choosing to book a trip outside of popular holiday periods such as July Fourth to still get the experience ‘without breaking the bank,'” reported Hotel News Now’s Dana Miller.
To create value for guests, hoteliers are leveraging outdoor spaces such as rooftops to provide unique programming.
The Ara Rooftop Pool and Lounge at Hotel Effie Sandestin in Miramar Beach, Florida, this summer is hosting live entertainment, including musicians and DJs, several times a week. Holiday-themed parties will also take place, as well as views of the weekly and holiday fireworks at Sandestin Golf and Beach Resort, General Manager Jim Marino said.
“Because Hotel Effie was designed around family traditions and lifelong memories for our guests, whether they are here for the day or a week,” he said. “When we have a musician who is loved by the guests, we want to continue hosting them. At the same time, we love trying new things in order to keep the guest experience fresh and exciting.”
The Kixby Hotel this summer is celebrating 120 years of being part of the opulent Herald Square neighborhood in New York with a fun twist on “summer Fridays” through its “120 Days of Summer” package.
The program is offering guests the opportunity to book a room for $120 every Friday. The room includes in-room goodies valued up to $120. Guests can also enjoy early check-in at 1:20 p.m. as well as food and beverage items at $1.20.
Kixby managing partner and co-owner Justin Arest said he hopes that as nearby businesses put summer Friday hours into effect for its employees, this will drive foot traffic to the hotel.
