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Event Budgets Getting Squeezed? Try Shedding a Tier

Recent hotel data shows that the top 25 markets are in demand and priced accordingly. But among second- and third-tier cities, demand is muted and prices are more reasonable.

After group demand at hotels grew every month in 2023 compared 2022, this year is not proving to be much more accommodating for meeting budgets. But for planners who have flexibility with location, the worst of the price hikes might be avoidable.

First, the First-Tier Situation
According to the latest data from the American Hotel and Lodging Association and industry-research firm STR, nationwide group demand for every week between January 7 through March 2 was higher than in 2023. In fact, group demand throughout January was 7.2 percent higher, while in the first week of March it was a full 9.1 percent higher than in 2023. To get more granular: For Monday, Tuesday, and Wednesday nights, demand in early 2024 was 12 percent higher than in early 2023, while Sunday night and Thursday night demand was six percent higher.

As a result, average daily rate for groups was more than five percent higher over the first two months of 2024 versus 2023, while line items such as audiovisual and group F&B were nearly 10 percent higher.

Those figures, however, come with a notable caveat: Almost all the early-2024 growth in group demand took place in the top 25 metropolitan areas. Specifically, group occupancy among those destinations was 11 percent higher, while 10 cities saw growth even stronger than that: Dallas, Houston, Las Vegas, Los Angeles, Miami, New York City, Orange County/Anaheim, Orlando, San Francisco, and Seattle.

Alternatives for Budget-Locked Events
In contrast, the metropolitan areas outside of the top 25 showed an increase in early-2024 group demand of just 1.4 percent, with revenue per available room estimated to be just 1.8 percent higher this year than versus last year, according to hospitality-research firm CoStar.

Further, CoStar finds that group bookings for Q2 2024 versus Q2 2023 are flat nationwide—but demand has differed significantly between the top 25 markets and other markets over the past year (see image below).

Given all this data, it seems that planners would be more likely to stay within budget by, when possible, holding upcoming events in second- or third-tier destinations.

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