As anyone who has been in an airport lately can attest: Travel is back. While it never completely went away, there’s no denying that the travel industry, and therefore the hospitality real estate sector, suffered greatly during the global pandemic.
While business travel continues to lag as the world grapples with how, where and why we work in today’s next normal, leisure travel is meeting 2019 levels as people begin to seek out experiences more than products as we collectively emerge from lockdown. Signs show that business travel is on a post-Omicron uptick and looks to gain momentum through the end of the year.
We’re happy to share several signs of a healthy revitalization: According to Mastercard’s Travel 2022: Trends & Transitions report, if flight bookings continue at their current pace, an estimated 1.5 billion more passengers globally will fly this year as compared to 2021.
The Travel Trends Driving a Hospitality Recovery
All of this movement means people need places to stay. Hospitality landlords report this month that revenue levels are now closing the gap between 2019 and 2022.
Hotel data such as occupancy and revenue per available room — the industry’s leading performance metric — show returns to pre-pandemic stats. Not surprisingly, some areas of the U.S. have fared better than others, with traditional snowbird states like Arizona and Florida reporting sunnier outlooks. The lag in business travel has hurt big cities like New York and Chicago, but creative initiatives such as converting hotel space into communal coworking areas are giving hoteliers hope.
Remote and hybrid work has had one unexpected upside for the hospitality industry: People with more flexible working arrangements often have the capability to travel during the week, blending business and leisure into a travel trend called “bleisure” (obviously).
There are two main types of bleisure travel: business trips that are extended on the front or back end of a visit, and business trips taken with friends and family coming along for the ride. Amenities such as unlimited WiFi access, business support services, wellness facilities and family-friendly activities entice business travelers to stick around.
Overall, hotels are operating at roughly 90 percent of their pre-pandemic levels, according to lodging research firm STR. Gross operating profit per available hotel room hit less than $10 below March 2019 levels — the highest since the pandemic.
Putting the Hot Back Into Hotels
How should property managers and investors interpret these trends and act accordingly? How do looming inflation and a stubbornly volatile jobs market affect financing new hospitality developments?
Analyzing the data from the past two years can provide some perspective: Hotel occupancy dropped to less than 25 percent in April 2020, when the world went into lockdown — and stayed there. Now, in the first quarter of 2022, hotel sales have topped $12.5 billion — the highest total since 2016.
The prices of hotels are also swelling, with many investors betting that these properties will recover faster than offices and shopping malls, both of which are having a harder time filling vacancies. Hotels are also able to combat the uncertainties of inflation more seamlessly by adjusting room rates as needed.
With leisure travel leading the surge, hospitality property developers, managers and investors can look to the future with some sense of optimism and position themselves to successfully deliver projects in today’s ever-evolving marketplace.
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