Navigating the pandemic’s impact on our industry has been filled with a lot of twists, turns, and surprises. One of the biggest surprises of the early and current recovery trends has been an explosion of leisure travel, which has benefited all chain scales, especially Luxury and Upper Upscale hotels in resort/destination markets. Leisure guests returned to the marketplace in numbers rivaling pre-pandemic highs by the summer of 2021, as pent-up travel demand drove many consumers back to hotels. At a national level, the Kalibri Labs forecast anticipates that leisure demand will maintain 2019 levels through 2022. Additionally, this surge of leisure travel led to faster-than-expected ADR recovery, with some markets experiencing peak ADRs, while others suffered from lack of occupancy historically driven by higher-rated group and commercial transient travel. This had a severe impact on Luxury and Upper Upscale hotels, particularly in large metropolitan areas, which include most of the Top 50 U.S. markets. In this view, it’s evidence the Luxury chain scale was hit hardest by the pandemic, and will take the longest to recover, reaching just 77.7% of 2019 RevPAR performance by the end of 2022. However, it’s important to note that the luxury hotels in resort destinations fared substantially better than those in the Top 50 urban centers. COMMERCIAL VS. LEISURE TRAVEL The recent predominance of the transient leisure traveler will likely continue for the foreseeable future, as they will represent approximately 60% of guest night stays over the next couple of years. Historically, this broadly-defined demand segment has represented less than 50% of room nights across all chain scales and market types in the U.S., and was at 47% in 2019. In the Luxury and Upper Upscale chain scales, The portion of occupancy coming from commercial segments has rebounded to just 21.7 points of occupancy in December 2021, vs. a prior peak in Q4 2019 of over 46 points of occupancy, on par with the U.S. average. Commercial is expected to rebound to only 80% of 2019 levels by the end of 2022. Conversely, commercial demand (generally group and transient corporate) has been, and will continue to be, much slower to return to pre-pandemic levels. While there will certainly be overall demand growth from this segment in 2022, it will remain significantly below pre-pandemic performance, and will not return before there is a meaningful uptick in the number of large conventions and groups, as well as the return of corporate-driven business transient travel. Kalibri Labs has closely monitored the commercial segments and has made several assumptions about the timing and nature of the return of group and corporate business. Group is gradually growing in all segments, as upper tier hotels have started to see a notable rise in group business during the second half of 2021. Larger groups and citywide conventions have yet to return, and this places a ceiling on the velocity of their return to pre-pandemic demand levels. Lower and middle tier hotels have experienced more rapid improvement in transient business travel. These hotels are more likely to be in suburban and rural areas, where the nature of the business travel tends to be comprised of local and regional accounts that are often driving to destinations and not constrained by large corporate travel restrictions. However, larger corporate accounts that tend to have travelers stay at upper tier hotels in more urban areas have been slow to return to their previous travel behavior due to a combination of factors, including budget restrictions, duty-of-care concerns, adherence to sustainability initiatives, and the new familiarity and ease of using remote meeting technology. Until these types of business travelers return, hotels in urban locations (especially those in the Luxury and Upper Upscale chain categories) will struggle to fully recover. About the author Cindy Estis Green is the CEO and co-founder of Kalibri Labs, a next generation commercial strategy platform to evaluate, predict, and benchmark hotel revenue performance. Using data science, Kalibri Labs helps hoteliers optimize profit contribution and supports the real estate community with tools that refine underwriting for investment and development. She can be reached at email@example.com. About the author Jennifer is the VP, Commercial Strategy at Kalibri Labs, where she partners with clients to tailor plans for adoption and the effective utilization of Kalibri Labs' products to optimize revenue and profit generation capabilities. She can be reached at firstname.lastname@example.org.