After pandemic forced industry into recovery, hotels offer discounts in anticipation of recession

Hotels are touting holiday discounts as they brace for a recession that could slow their pandemic recovery in the new year, according to industry insiders.

A recession would jack up rates and revenues per available room at top-dollar resorts, according to CoStar Group, the parent company of leading hotel market researcher STR. At the same time, CoStar forecasts business travel, roadside stays and vacation demand would take hits as corporations limit employees to essential trips and working Americans trim leisure expenses.

“The recession will not hit all American travelers the same,” Jan Freitang, CoStar’s national director of hospitality analytics, told The Washington Times. “High-end travelers will continue to have money and spend it on resorts, but room demand may drop in the first half of the year at full-service downtown hotels and limited-service hotels along highways and in vacation areas.”

Hotels expecting the biggest hits are already cutting their rates to attract holiday business before a recession hits, industry analysts say.

Many hotels will offer year’s-best discount rates of under $150 a night during the weeks of Dec. 15-20 and Jan. 3-8, according to booking service Hotels.com.

“In a typical year, travelers can find the best deals between Labor Day and Thanksgiving during fall shoulder season,” Hotels.com spokesperson Melanie Fish said in a statement. “But travel demand hit an all-time high this summer and never really slowed down, meaning people searching for off-season deals had to do some extra digging to find those price drops.”

Surging bookings, industry shortages and inflation simultaneously impacted hotels as health officials lifted COVID-19 travel restrictions early this year.

Operators are still struggling this month with shortages of furniture, cookware and even helium for balloons, said Yannis Moati, CEO of the booking service Hotels by Day.

“Not having balloons deflates the party atmosphere because it’s part of the festivity the hospitality industry offers,” Mr. Moati said. “We have shortages of everything and we’re not sure where we’re heading with the current economy. Many tourists will have spent everything on Christmas products by next month.”

While bookings for the New York City-based service were up 29% during the first six months of the year over the same time last year, Mr. Moati said they have “flatlined” during the second half of the year.

The industry also has struggled to replace frontline hospitality and food service workers who did not return from furloughs during COVID quarantines. Some hotels “hired” robots and installed automated kiosks this year to replace human housekeepers and servers who switched to work-from-home careers.

“As for the labor shortage, the industry continues work to improve staffing levels and has made other adjustments to ensure guests and travelers still have a quality experience,” Ragina C. Ali, AAA Mid-Atlantic spokesperson for Maryland and Washington, D.C., said in an email.

The American Hotel and Lodging Association (AHLA) says there are more than 100,000 hospitality job openings this month, even though hotel wages have reached a record-high national average of $22 an hour and employers have offered enhanced benefits to attract staff.

According to an AHLA estimate, hotel leisure travel revenue will end the year 14% above 2019 levels, while hotel business travel revenue will fall about 1% short.

“This is great news of course, but it comes under the specter of high gas prices and inflation, which are now more of a factor in many Americans’ travel decisions than COVID, according to AHLA research,” AHLA President and CEO Chip Rogers said in an email. “So far, these issues haven’t had a huge negative impact on travel demand, and we hope it stays that way.”

According to STR’s latest numbers, the hotel occupancy rate reached 57.2% in October, up 7 percentage points from a year ago. The industry researchers found that the average room rate that month hit $156, up 15 points from a year ago, and revenue per available room rose by 23% to $105 over the same period.

CoStar Group’s Mr. Freitang said leisure cities like Miami and Tampa in Florida; Norfolk, Virginia; San Diego; and Honolulu have already exceeded their 2019 revenues this year and are well placed for next year. But business travel-dependent cities like Washington, D.C., Houston and San Francisco are in trouble.

“It’s really a tale of two cities,” Mr. Freitang told The Times. “If you’re in a leisure city, you’re doing better than in 2019, but you’re really not recovered at all in cities that depend on business travel. The main thing you see as a guest is we’re not fully staffed yet. We’re still 250,000 to 300,000 employees short of where we were in January 2020.”

For more information, visit The Washington Times COVID-19 resource page.