If it takes 21 days to establish a new habit, it seems 29 months should be enough to help us feel like our world is no longer “new”. However, every month since March 2020 has felt like a new experience, and the way our business mix continues to shift is no different.
Understanding Demand Mix
In response to the critical need to monitor the return of commercial business by market and submarket, Kalibri Labs has identified the segments that comprise Transient Commercial demand include Corporate, Government, Consortia, and Rack/BAR and Loyalty Member Rates on weekdays, while Commercial Group includes Association, Convention, Corporate, and Government. Segments that make up Transient Leisure demand are all discount programs (AAA/AARP, Advance Purchase, etc.), Promotion/Packages, weekend Loyalty Member Rate, and OTA.
Through June 2022 year to date, Transient Commercial contribution to U.S. Guest Paid RevPAR was $, down -4.3% from 2019 for the same time period. Transient Leisure contribution was $45.69, up +9.6% from 2019.
In the Luxury Chain Scale, contribution to Guest Paid RevPAR for Transient Commercial was $59.51, down -12.9% from 2019. However, Transient Leisure was $97.18, up slightly versus 2019, +0.7%. This positive trend toward heavier Transient Leisure business is common across all chain scales, and in all location types except Large Metropolitan – Urban.
In the long term, it is expected that Transient Commercial will rebound a bit as travel resumes in a way that resembles pre-pandemic travel, especially for corporate travel. However, in the short- and mid-term, travelers will continue to blend their purpose for travel, resulting in a continuation of the current mix of business and strengthening Guest Paid ADR, especially in the Transient Leisure segments.
A Permanent Shift in DOW?
Weekends (Friday and Saturday) and shoulder days (Thursday and Sunday) continue to lead the recovery, with each of these weekparts exceeding contribution to Guest Paid RevPAR versus 2019. In Q2 2022, weekday Guest Paid RevPAR contribution inched up to meet 2019 performance; however, through the summer and remainder of 2022, it is expected to fall short compared to weekends and shoulder nights.
The peaks and valleys for contribution by weekpart follow typical seasonality, and there is no cause for concern as we approach the end of the year.
In addition to a likely permanent shift in business mix and day of week pattern, another trend that has been hard to ignore over the last several months are surprises in emerging markets.
In June 2022, Gainesville, Florida and Augusta, Georgia jumped into the Top 10 Markets for Transient Leisure, from their prior positions of 281 and 60 respectively.
Similarly, high performing Transient Commercial markets are unexpected, with jumps by Salina, Kansas, Niagara Falls, New York, and Sandusky, Ohio into the Top 10 from prior positions of 20 or lower.
Tracking performance by chain scale and market by location type is important as we look ahead to 2023 and beyond, because they will both continue to play a key role in performance recovery.
As the industry plans for the remainder of the year, 2023, and beyond, it will be imperative to keep the factors of costs, control (over channel and rate category mix), and competition top of mind. Labor is going to be prioritized as well, with a shift back toward guests expecting daily room cleaning.
One interesting trend that has emerged since the start of the pandemic is a slight uptick in the average length of stay, from roughly 1.9 nights to 2.0 nights. While it is a trend to keep watch over, early signs have indicated that that tenth of an increase in average length of stay can be the equivalent of 44,000 check-ins across all U.S. hotels. A significant decrease in the number of check-ins and subsequent increase in stayovers will play a role in how hotels manage staffing and wage decisions.
It is more evident than ever that we cannot ignore the material changes the U.S. hotel industry has experienced over the last 29 months as it relates to business mix, day of week patterns, and length of stay. It is critically important for commercial strategy teams to keep this in mind as they plan for the future.