Today’s Central Penn Business Journal featured THIS ARTICLE by reporter Stacy Wescoe, which painted a grim recovery picture for the Pennsylvania hotel industry. Ms. Wescoe reported accurately on the overall state of the industry in the commonwealth. What she missed was the wide variability among submarkets and hotel types within Pennsylvania. To be fair, CPBJ’s abbreviated format does not allow space for this analysis, so I’ll provide it here.
The article says, “Nationally hotel business travel revenue is expected to be down 23% compared to 2019.” True. Q1 of 2022 saw significant impacts on business travel from the Omicron variant of Covid. Since then, corporate travel has been improving at an accelerating rate. Yet corporate travel in Q4 2022 may still be off its 2019 pace. Why?
A large segment of business travel consists of shows, conventions, and large corporate gatherings, which occur in full-service hotels with large meeting facilities. Most such hotels are located in international gateway markets such as Philly and Pittsburgh, and to a lesser extent, hotels such as Hilton Harrisburg and Hershey Lodge come to mind in central PA. That large group business typically books one to two years in advance, so it won’t hit full stride until after 2023.
Pandemic mindset is causing other corporate travel to restart cautiously, with one major exception. The logistics industry is enjoying a historic boom, which is fueling record room-night demand in locations where distribution is a significant economic driver. Most of Springwood’s hotels are located in markets heavily influenced by logistics, and we expect all of those to post record revenue in 2022.
The CPBJ article also correctly stated that “leisure travel is expected to return to pre-pandemic levels this year.” Buoyed by a post-pandemic boom, the weddings, funerals, and class reunions that were delayed during Covid are now booking Thursdays through Sundays at every venue that will host them, and those guests need a place to stay.
A larger leisure driver this year is the pandemic cabin fever that has influenced declining mental health over the past two years. Folks are done with it, and they’re flocking to where they can enjoy themselves. Price seems to be less important to them than it was in 2019.
Exhibit A for leisure travel is Hershey, PA. Omicron suppressed the Hershey market in Q1 2022, but its outlook for the remainder of the year is brilliant. Think about it. For leisure travel “to return to pre-pandemic levels this year,” the remainder of 2022 must EXCEED 2019 figures. That’s exactly what we see from April results and from advance reservations. Both of our hotels in Hershey will likely experience record revenue in calendar year 2022.
If you’ve read this far, then you care about understanding the subtleties of the hospitality market. Remember this when folks cite broad industry averages. That reminds me of the tale of the fellow who placed one hand on a hot stove and the other in the freezer. On average, he was comfortable. There’s often more to the story, and it pays to look more closely.
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