Year of the ‘Revenge Traveler’
Cooped-up tourists jolt hotel markets across the country
Alison Aplin cashed in air miles from pandemic-punctured trips to Hawaii and London for a Thanksgiving break in Los Cabos, her third vacation in as many months. The all-inclusive resort stay follows a trip to San Diego and another to Fort Myers, Florida, with a friend, which she described as a get-together for two “stir-crazy women before we’re forced back into the office.”
Long-homebound “revenge travelers” are propping up the nation’s hotel industry, targeting sunny destinations with plenty of outdoor amenities — and many seem impervious to room rates that in some cases have rebounded past pre-Covid levels.
High traffic this fall followed “the best summer leisure season that we’ve ever had in our 102-year-history,” Hilton CEO Christopher Nassetta recently told Yahoo Finance Live. Weekends are “slammed everywhere,” and the company anticipates a “very, very strong” holiday season, he said.
Yet there’s a catch. The hotel industry’s lifeblood is still business travel, especially by mass advance pre-bookings from conventions that put upward pressure on rates. Even as vaccine mandates become effective and travel bans end, it may take years for that business to return to normal.
In San Francisco last year, convention groups booked just a tenth of the record 1.2 million nights they did in 2019. It was even worse this year, when they signed up for about 50,000 fewer nights than in 2020, according to the San Francisco Travel Association. Scrapped conventions in the past two years represent a $1 billion loss in direct spending, the tourism group says.
By last month, the city’s average hotel room rates had dropped by 55 percent, to about $95 a night. Occupancy is 35 percent lower than it was before Covid, the biggest drop in the nation, according to STR, a subsidiary of CoStar.
“San Francisco was a top-performing market, so it had further to fall,” said Emmy Hise, CoStar’s director of hospitality analytics for the Western U.S. “But even looking at absolute values, it’s one of the hardest-hit markets.”
It’s not just San Francisco. In Chicago, also hit by the shrinking convention market, rates have fallen almost 40 percent, to about $70 per night, the second-biggest drop after the Bay Area. New York hotels fell to 68 percent occupancy by November 2021 from 90 percent, in part because 16 new hotels have opened since July. Average daily room rates are down about 14 percent, to $250 a night, according to STR, while in L.A., rates are close to even with the pre-pandemic average of about $180 a night, even though occupancy is down 10 percent.
San Francisco started welcoming a smattering of conventioneers in September, when the Moscone Center reopened after an 18-month closure. It has more than 30 events already booked for 2022 compared with 49 in 2019, SF Travel says. That includes a meeting of — what else? — meeting planners: Some 2,000 members of Meeting Professionals International will head to the city in June.
Another part of the city’s recovery push is a two-year, $12.5 million Welcome Ambassador Program. Employees dressed in bright orange branded hats and jackets will greet tourists and help show them around, according to SF Travel.
Hotel companies are backing up their optimism for the overall market by buying and developing properties. Hilton opened 96 new hotels, totaling about 14,700 rooms, in the third quarter. It has more than 2,600 hotels in the pipeline, including properties in 27 nations where it doesn’t already have a presence.
New York is the U.S. leader when it comes to building hotels. Some 17,000 rooms were under construction in November, according to Anne Purcell, CoStar’s director of hospitality market analytics for the Northeast. The building boom had already put downward pressure on rates even before the pandemic, she said, and in the near future, “more rooms will be very challenging for the market to absorb.”
Although Marriott is also building, it’s focused more than ever on buying properties that it can rebrand. It added 114 properties with 17,456 rooms worldwide in the third quarter, including more than 2,200 converted to its brand.
“We’ve already added more conversion rooms in the first nine months of this year than we did in all of 2019, accounting for over 30 percent of all signings,” CEO Anthony Capuano said on an earnings call. That compares with 15 percent before the pandemic.
Pent-up leisure demand has led to rates in many markets that are higher than before the pandemic, even though occupancy is still down, according to STR data. CoStar hasn’t seen that trend before in the four decades that it’s tracked the market, Hise said, attributing it to a labor shortage, inflation and high-spending domestic travelers largely deciding against international destinations.
“Most travelers opted for domestic locations and potentially stayed at a higher-end hotel than they normally would due to higher balances on savings accounts, less money spent on airline tickets, or simply because people were looking for a great vacation or travel experience when things started to open up after a very rough year of lockdowns and homeschooling,” she said in an email.
Luxury brands such as the Four Seasons and Waldorf Astoria are leading the way. They were able to charge 14 percent more in September 2021 than they did in 2019, even though occupancy rates are a fifth lower. “Upper midscale” properties, whose occupancy rates are 6 percent lower, can charge almost 6 percent more. Overall, U.S. hotel occupancy rates were down almost 4 percent in early November, while average daily rates were up 2.6 percent, according to STR data.
The disparity between rates and vacancies is stark in Miami. The average daily rate between June and September was almost 40 percent higher than before the pandemic, while occupancy was down 10 percent.
Vacations in Florida, home to eight of the nation’s top 20 hotel markets, rank high for domestic travelers. Rates in the Keys jumped 65 percent this summer to an average of $370 a night. It didn’t hurt that Governor Ron DeSantis announced an end to all Covid-related restrictions in May, when the Biden administration was just beginning to relax federal guidelines. A push to bring in out-of-staters that began in August 2020, while other states still had 14-day quarantines, led to Florida “dominating the recovery of the U.S. travel industry,” said Leslie Pearsall at Visit Florida.
Beach and mountain stays will remain popular through the holidays and into 2022, though “we aren’t assuming pricing and peak demand levels will be quite as acute as last year,” said Aran Ryan, director of lodging analytics for Tourism Economics, a subsidiary of Oxford Economics and data partner with CoStar.
San Francisco hopes to welcome travelers back, but some of its cooped-up residents can’t wait to get away. Patricia Callaway, who runs a small graphic design business there with her husband, had to hire 10 people in the past 18 months as one staffer after another quit.
Between work stress, two young kids who spent a year in virtual school and just feeling a bit burned out, she couldn’t wait for a Thanksgiving week getaway to the Fairmont resort in Maui. Without giving it much thought, she picked an upgraded, more expensive room with an ocean view.
“It’s time to be taken care of,” Callaway said.