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City-Center Hotel Compression Likely This Year

Recent industry data finds a sizable increase in convention-center bookings for 2023, which should offset reduced transient business travel and keep urban hotel rates frothy.

A recent data analysis and forecast from Lodging Analytics Research & Consulting finds that group demand at urban hotels in 2023 will likely be more than 10 percent higher than last year, thanks to convention-center bookings that are at least 13 percent higher than in 2022.

Conversely, both leisure travel and transient business travel will be a smaller segment of the urban travel market this year. First, leisure travel is set to come down by as much as 30 percent in 2023 due to the end of government stimulus payments and the potential for recession, according to Ryan Meliker, president and co-founder of Lodging Analytics Research & Consulting.

Second, the rate of downtown-office usage is about half of what it was in 2019 and “we think those rates will never get back to their 2019 levels,” says Meliker, as reported by Hotel News Now. “That is going to truncate the number of nights employees go on the road to meet with clients, creating fewer room nights from the corporate transient segment.”

However, Meliker notes that “hotels will have better pricing power over group business travel since, instead of sending travelers on short transient business trips, companies might send employees to larger conferences to facilitate business more efficiently.”

On a related note, industry analyst CBRE projects that average daily rates at upper-tier hotels in the top 65 U.S. cities will be more than five percent higher than they were in 2022.

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