Excerpt from CoStar
Executives Concerned About Potential 'Rate Ceiling' as Guests Become More Wary of Travel Cost
During the latest meeting of the Lodging Industry Investment Council, hotel industry experts explained how guest behavior, particularly shorter booking windows, pose a challenge for planning.
Guest booking behavior has been in flux since the start of the pandemic and through the recovery, and hoteliers are trying to keep up.
During a meeting of the Lodging Industry Investment Council, hotel industry experts shared how leisure and group travelers' newer booking window preferences and rate sensitivity are affecting hotel performance.
Transient booking pace and the booking windows have shortened to the point where much of the business is in the week for the week, said Jonathan Falik, founder and CEO of JF Capital Advisors. If there’s no group base, it’s difficult to figure out how to staff and revenue-manage a hotel properly.
“That’s one of the trickiest parts about the industry right now, that the business is showing up but no one’s booking in advance,” he said.
A year ago, meeting planners were trying to get organized but didn’t have the authority to sign contracts, Falik said. That resulted in a lot of negotiated but unsigned deals. That uncertainty has faded, but much of the business coming in is still within a shorter window.
Small group meetings have been great demand drivers in the past couple of years, but those also have shorter lead times than are expected for a large convention booking, said Mark Wang, senior vice president of acquisitions and business development at Davidson Hospitality Group.
“The demand into the hotel seems to be short booking windows, and that can lead to short-term cancellations,” he said. “You’re not going to be able to fill that on short notice most of the time.”
Davidson is expecting strong summer demand for its hotels, Wang said. The second quarter was a little slower compared to last year while the first quarter was much stronger. In leisure resort markets, the demand has been lighter than a year ago, but the third quarter is expected to be similar to 2022.
Through the second quarter, Raines has been pacing about 8% off the previous year, said Kerry Ranson, president of operations and partner at Raines. It’s about 2% to 2.5% up in its budgeted forecast, and the summer is pacing more than 9% over last year’s budget.
“We went strong in the summer, expecting and trying to hold some of that stuff, and we’re actually pacing a little bit below our summer budgets currently, so still up over last year,” he said, adding the growth has been rate-driven as occupancy has been steady.
Ranson said he’s concerned about hitting a rate ceiling, especially heading into the third quarter.
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