Increase in Group Rates Drives Hotel Recovery

The 2023 third quarter edition of the Hospitality Group Business Performance Index was released last week. Group business is on a clear upward trajectory, achieving 103% of 2019 levels, driven largely by a 12.1% increase in average daily rate (ADR).

Much of what’s driving the recovery of group and business sales in the hospitality sector is hotels shifting focus away from leisure and transient business, which drove recovery in 2021 and 2022 in terms of average daily rate (ADR), according to Senior Vice President, Revenue at Knowland, Patricia Shea. “This was the first time the market didn’t cave on rates,” she added, noting that stabilized rates were the key driver of the recovery as opposed to occupancy. 

This strategy was compounded by other factors, such as inefficient staffing levels and dealing with increased costs triggered by inflation and supply chain issues. “From a hotel perspective, it made sense to focus on transient business rather than groups,” she said. However, the increased demand for face-to-face meetings is causing hotels to become more interested in capitalizing on the demand generated from groups and events that continue to provide a stronger revenue foundation. 

In total, 13 of the 25 markets have increased their group revenue compared with 2019 figures for the third quarter. Tampa, Las Vegas, San Diego, and New York City have increased their group revenue by more than 10%.

Third Quarter Revenue of Top Markets (2023 v 2019)

1. Tampa – 116.8%
2. Las Vegas – 114.0%
3. San Diego – 111.5%
4. New York City – 111.2%
5. Phoenix – 109.9%
6. Seattle – 108.5%
7. Orlando – 108.2%
8. Dallas – 107.8%
9. Houston – 107.7%
10. Detroit – 106.2%
11. Washington, DC – 104.5%
12. Denver – 101.0%
13. Boston – 100.0%

The overall average recovery for all 25 markets for group business, considering both occupancy and ADR, sits at 99.1%.

This quarter also showed promise for events specifically, with the overall market reaching 89.1% of 2019 levels. Austin, TX, Nashville, TN, and Denver, CO, stood out when it comes to events, which all achieved 145% over 2019 for the third quarter. A full recovery across the industry is expected in the first quarter of 2024.

Corporate Meetings Dominate

Corporate meetings make up around two-thirds of the group booking and event data in the index, but the distribution has gone down slightly from 65.1% in 2019 to 61.3% in 2023. Government, Weddings, Association, and the SMERF (Social, Military, Educational, Religious, and Fraternal) segment all increased slightly.

The shift to remote work has increased the urgency surrounding in-person meetings. Small company gatherings are a popular way to foster collaboration and promote company culture. Data collected from the third quarter shows that 70% of corporate meetings consist of under 200 attendees. The two most popular segments are meetings ranging from 101-200 attendees (20.4%), and meetings ranging from 26-50 attendees (19.8%). 

The forecast of meetings and events included in the report appears optimistic moving forward. The demand for in-person events is forecasted to continue during the fourth quarter in markets including Atlanta, Las Vegas, Seattle, Houston, Orlando and New York City, which are expected to see a full recovery for event business in 2024. The recovery of events in the remaining markets of St. Louis, Washington D.C., San Francisco, Philadelphia, Boston, and Chicago are expected to occur in 2025. 

The Index combines event data from Knowland with hotel booking data from Amadeus to give individual and aggregate views of the key drivers of hotel performance. It is updated on a quarterly
basis.