Pent-up demand for travel from two years of Covid-19 doldrums is bringing hotel rates in the United States within reach of—and often beyond—2019 performance levels.
“The U.S. was tracking close to pre-pandemic levels” when the country in November lifted its ban on international travel, said BCD Travel VP and hotel practice lead Laura Kusto. “In December, we saw that gap close,” she added.
Even with the unsteady start to 2022, thanks to what American Express Global Business Travel EVP David Reimer termed the “omicron hangover,” travel demand revved up again around President’s Day weekend in February. That said, leisure travel so far has driven the lion’s share of travel recovery. As the omicron variant wanes in North America, companies get back to their offices and mask mandates and other restrictions are lifted—Hawaii was the final state in the U.S. to lift its indoor mask mandate, which will expire on March 25—business travel is poised for a comeback.
But recovery won’t be smooth for all North American markets.
Progress Projected in 2022 for Lagging Gateways
Hoteliers in recent earnings calls have highlighted business travel recovery patterns thriving outside major gateway cities, and BTN’s 2022 Corporate Travel Index reflects similar trends. Secondary cities like Cleveland and Columbus, Ohio; Indianapolis; Louisville, Ky. and Tulsa, Okla., among others, have met and surpassed fourth-quarter 2019 corporate booked hotel rates by double-digit percentages.
Traditional gateway markets that rely heavily on business travel—and on inbound international travel of all kinds—have suffered deeper losses, and many are still lagging their 2019 fourth-quarter corporate booked hotel rates. Boston’s fourth-quarter 2021 corporate booked hotels rates ran 6.9 percent lower than 2019; Chicago was down a little more than 10 percent still in Q4 2021; New York remained off its 2019 corporate booked rates by 6.9 percent and Philly was off by slightly more than 10 percent as well. Washington, DC posted Q4 2021 corporate booked rates, according to BTN’s index, 12 percent lower than 2019. Seattle was 9 percent off Q4 2019. All these cities, though, were comfortably ahead of Q4 2020 hotel rates.
BTN’s index did show some bright spots for rate recovery in major cities. Dallas in the fourth quarter of 2021 was up more than 6 percent from its 2019 hotel rates, with Miami up nearly 23 percent. Los Angeles was up nearly 16 percent.
“We’re not seeing that bounce with [with San Francisco],” Shor said. “It’s more conjecture than anything, but a lot of the dot-coms obviously have not returned to the office with any type of gusto.”
Some of that bounce, according to Corporate Travel Management chief partnership officer Erik Shor, was tied to early and eager lifting of local Covid-19 restrictions.
“Texas and Florida, from both a leisure and a business travel perspective, have held up better than other [markets]. Houston, Dallas, Miami, Tampa—we saw a bit more resilience in those markets,” he said. “But now we’re seeing more resilience in some of the more traditional business markets, like New York, Washington and Boston. Some of these more traditional markets do seem to be staying off the bottom.”
That’s not the case for San Francisco. According to BTN’s index, San Fran posted a $379.17 corporate booked hotel rate in the fourth quarter of 2019. It fell to $184.56 in Q4 2020 but had recovered just to $246.98 by the fourth quarter of 2021—still behind its Q4 2019 corporate booked rate by nearly 35 percent.
“We’re not seeing that bounce with [with San Francisco],” Shor said. “It’s more conjecture than anything, but a lot of the dot-coms obviously have not returned to the office with any type of gusto.” And some have sent workers packing to new centers in cities like Austin, Tex., which—related or not—has seen corporate booked hotel rates return to pre-pandemic levels. That said, San Francisco remains the third-most expensive U.S. city in BTN’s index, despite hotel rates lagging further behind 2019 highs.