All eyes on September: Hotel industry expected to see slowdown with close of summer travel season, Delta variant

Hotel industry leaders are keeping a cautious eye on the Delta variant's impact on travel, especially as the summer travel season has officially come to a close.

Chicago Business Journal

By: Ashley Fahey

Hotel industry leaders are keeping a cautious eye on the Delta variant's impact on travel, especially as the summer travel season has officially come to a close.

The past three months have been marked by better-than-expected recovery for metrics like revenue per available room, average daily rate and occupancy across the U.S., especially for metro areas that are leisure destinations.

For the week ending Aug. 28, hotel occupancy was 61% nationally — that's compared to 66.7% for the same week in 2019 and 48.3% in 2020. ADR was $131.91, compared to $127.84 during the same time period in 2019 and $99.13 a year prior. RevPAR averaged $80.53, compared to $85.23 in 2019 and $47.85 last year.

Among the top 25 markets STR tracks, the Norfolk/Virginia Beach, Virginia, market saw the highest occupancy and revPAR increases from the same time in 2019, a 2.8% and 21.1% increase, respectively. The San Francisco/San Mateo area saw the steepest decline in occupancy and revPAR compared with 2019, a drop of 43.2% in occupancy and revPAR decline of 65.5%, to $81.15. Miami posted the largest ADR increase over the same week in 2019, a 27.5% jump to $173.61.

But with school back in session — in-person, not virtual, for most school systems — and the Delta variant causing a spike in Covid-19 cases, the industry is, once again, having to grapple with whether the recovery will be prolonged.

Ali Hoyt, senior director of consulting at STR Inc., said it's typically for the hotel market to see a slowdown this time of year. Normally, group and business travel would fill in those gaps, but given the delays in return-to-office by many companies because of Delta, reduced business travel is expected to have some impact, although it's not apparent in the data yet.

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"We're anticipating a continued slowdown of that leisure demand post Labor Day," Hoyt said.

Over Labor Day weekend, Friday, Sept. 3 and Monday, Sept. 6, saw more than 2 million passengers pass through U.S. airports, according to U.S. Transportation Security Administration checkpoint data.

On Sept. 3, about 2.1 million travelers passed through U.S. airports, compared to 968,673 a year prior and just shy of 2.2 million in 2019. On Sept. 6, about 2 million travelers were logged, compared to 936,308 that same day in 2020 and about 2.3 million in 2019.

Stephanie Linnartz, president of Marriott International Inc., said in an interview last month the hotel company was watching the impact of Delta closely.

"We've all had our eye on September," Linnartz said.

But, she continued, other countries, such as the United Kingdom, have been able to navigate the Delta variant. Although some economies have gone back into lockdown orders, most haven't resorted to the mass shutdowns that were commonplace last year.

Linnartz said Marriott had been seeing cancelations "here and there" for group bookings but new reservations for that type of travel were continuing to occur as well.

"It's too early for us to say if we've seen any significant impact from the Delta variant in terms of our recovery," she continued.

Hoyt said while the hotel market's recovery has been led by leisure travel, some business-reliant markets have seen a rebound, too, even if for more leisure-type activities. STR looks at weekday versus weekend trends, which has showed strong weekend performance — mostly leisure travel — but continued slower demand during the week, which is usually business travel.

Some travelers are extending business trips to destinations into the weekend, a hybrid business-leisure trip called "bleisure" among industry types.

Alaska Airlines CEO Ben Minicucci told The Business Journals the company is seeing choppiness because of the Delta variant. Minicucci said every time Covid-19 infections are on the rise, the airline sees an impact of bookings, but "it's nothing like it was in the early part of the year."

Linnartz also used the word "choppy" to describe the recovery for the hotel sector.

"I think that things will continue to get better month by month and quarter by quarter," she said. "It doesn't mean we won't maybe have to, in certain parts of the world, (take) one step backwards, two step forwards ... that's the definition of being choppy."

In STR's most recently revised forecast, it's projecting overall 2021 U.S. hotel industry occupancy of 54.7%, ADR of $115.50 and revPAR of $63.16, the latter metric being 25% below 2019 levels, Hoyt said. Full revPAR recovery isn't expected until 2024, STR predicts.

"Even though it was a busy summer and we’re encouraged to see growth in leisure (travel), we still know it’s going to be a rocky road ahead for many markets," Hoyt said.