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MARKET SPOTLIGHT: LOS ANGELES, CA

By Mark Lomanno, Partner and Senior Advisor for Kalibri Labs
12 July 2020
4 min read
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Observations:

  • Los Angeles hotels have been hit hard by the pandemic, especially those at the high end of the price spectrum, where occupancies are currently running at less than 10%. The middle and lower tier hotels have been less affected with occupancies running in the mid-30% range.
  • The percentage of current guests who are loyalty members is down significantly from last year (-28.57% May 2020 YoY), indicating that frequent travelers have not yet returned in any meaningful way.
  • Interestingly, there is much more volatility in revenue generation by rate category in Los Angeles hotels than we have seen in other markets. This is true across all price tiers but especially acute in lower tier hotels. This may be a reflection of both the diverse nature of hotel supply available as well as the current customer mix.
  • Of particular note is the extreme variability by week of corporate booked business. This is especially true in the lower tier hotels but is also evident in both the middle and upper tiers. The week ending 5/29 showed particular strength in this rate category in all three tiers. Our working hypothesis is that the booking are being coded this way when large blocks of rooms are booked for non-traditional hotel use.

RED: OTA
YELLOW: Rack/BAR
BLUE: Group
GREEN: Corporate
PURPLE: Promotion + Loyalty Member Rates

Source: Kalibri Labs; Data Current Through: 06/19/20; Lower Tier includes Economy + Midscale Chainscales. NOTE: Some multiple week stays may cause gaps in weekly reporting.

Source: Kalibri Labs; Data Current Through: 06/19/20; Lower Tier includes Economy + Midscale Chainscales. NOTE: Some multiple week stays may cause gaps in weekly reporting.

Source: Kalibri Labs; Data Current Through: 06/19/20; Upper Tier includes Upper Upscale + Luxury Chainscales. NOTE: Some multiple week stays may cause gaps in weekly reporting.

LOS ANGELES – POTENTIAL RECOVERY SCENARIOS

Kalibri Labs has constructed several market recovery scenarios to map out the return of revenue to 2019 levels. Due to the uneven nature of the recovery in terms of which types of business can activate, rate category emerges as a primary indicator of how long the recovery may take by market. With restrictions on group gatherings and corporate limitations on employee business travel, those markets highly dependent on larger group or transient travelers from larger corporate accounts, may experience a more protracted recovery. Those with drive-to local/regional corporate or leisure demand are likely to recovery more quickly.

  • As Los Angeles hotels cater to a wide variety of guests the markets ability to recover is a bit harder to predict than most. With transient corporate and leisure guests as well as international travelers all being significant and important customer groups, the timing of the recovery of each of those traveler segments will determine both the velocity of the recovery as well as which hotel segments normalize first.
  • With most prognosticators believing that group business will be the last segment to return, that effect will not be as severe for Los Angeles hotels as they are less reliant on group business than most major markets.
  • Clearly, the current coronavirus situation in Southern California is a deterrent to any meaningful hotel recovery for Los Angeles hotels in the short term. With renewed restrictions now in effect, the timing of any surge in demand is now unlikely before later this year.
  • Also important will be the return of international travelers, which is also not on the immediate horizon.

DETAILS ABOUT MARKET SPOTLIGHT

Markets have been initially selected based on client interest and their predictive nature regarding the a general industry recovery.

We will review 2019 market performance with a special emphasis on room rate category revenue generation and those rate categories contribution to market level Guest Paid Revenue.

Additionally, we will examine weekly performance by room rate category at both the market level and three price tiers, Upper, Middle and Lower with the intention to look for trends that may indicate short to medium changes in performance metrics.

Finally, we will make some observations about what we see in that weekly data and how it relates to the potential time frame of a full market recovery as measured from a room revenue/Guest Paid Revenue perspective.

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