Tourism Brought Boston's Hotel Market Back To Life This Summer, But Business Travel Still Lags
Boston’s hotel industry saw major improvements this summer as leisure travel surpassed pre-pandemic levels, boosting demand across the region.
Hotel managers and researchers told Bisnow that although they expect fall and winter will be better than last year, they are worried about the impact of slow corporate travel once tourism season ends.
At the end of August, Boston had the highest weekday occupancy among the top 25 U.S. markets, coming in at 81%, according to STR.
“This time last year, Boston was the third-slowest market to recover across the top 25 markets,” Pinnacle Advisory Group Vice President Sebastian Colella said. “Now fast forward to today. We're sort of in the middle of the pack. And it was really because of our performance and all the gains we've seen in just the last three months.”
The market’s overall demand is still below 2019 levels, but there is a dramatic gap between the recovery of leisure travel and business travel. Leisure demand for the Boston-Cambridge market this year has been roughly 155% of 2019 levels, while corporate demand has been roughly 50% of the pre-pandemic year, according to the Pinnacle report.
Colella said that one-off events that took place in Boston this summer, including the U.S. Open golf tournament in Brookline, the Boston Celtics and the Bruins playoffs, as well as college graduations, helped boost hotel demand.
“There's really a six-week period where a lot of things just sort of overlapped with one another and really helped drive leisure demand,” Colella said.
An increase in conventions and group events at the Boston Convention and Exhibition Center and Hynes Convention Center has helped to fill hotels in the Seaport and Back Bay. According to the Pinnacle report, room nights from conventions through July of this year were more than double last year’s level.
“We saw a lot of travel, especially domestic, a lot of families and a lot of people coming in for conventions through the BCEC,” Piteira said. “You could see the city was alive again.”
Boston Park Plaza General Manager Shane McWeeny said that the hotel saw strong numbers on the leisure side. It has also seen a bump in demand from weddings, with about 50 this year and around 30 in a normal year.
“I think leisure travel was our big win for July and August,” McWeeny said.
The Boston hotel market’s recovery this summer has also been highlighted by multiple executives of national hotel real estate income trusts that have holdings in the market.
Pebblebrook Hotel Trust Chief Financial Officer Raymond Martz said on the REIT's July earnings call that its Boston occupancy improved from 68% in Q1 to 87% in Q2. Sunstone Hotel Investors, which owns Boston Park Plaza and Marriot Boston Long Wharf, also saw stronger numbers in the leisure and business travel sectors of the industry.
The market's recovery has been dragged down by the slow return of business travel.
McWeeny said he thinks business travel demand will increase from where it is today, but he doesn’t think it will fully recover to pre-pandemic levels.
“I do think it's a new normal,” McWeeny said. "I don't think business travel will be identical to what we saw. I still think it is so important for business to be conducted face to face. I think it'd be a hybrid and you'll see a lot of businesses coming back.”
Demand in Cambridge has lagged behind Boston in July due to its reliance on midweek corporate travel. The city’s RevPAR in July was 75% of its 2019 level, according to the Pinnacle report.
“I think that business travel is going to be the last one to recover, if it does fully recover at all,” said Makarand Mody, associate professor of hospitality marketing at Boston University. “When you're thinking about a business hotel, you're probably never gonna see the same numbers that you saw.”
While the Boston hotel market benefited from leisure travel during the summer, experts said they are uncertain about how the city will fare in the cold-weather months. But they are cautiously optimistic that this winter will be stronger than the last two years.
“I think one of Boston's perennial problems is the winter,” Mody said, adding that he thinks the momentum from this summer will carry into the fall and winter.
With looming concerns about what may happen in the fall and winter, some hotel managers are finding it hard to plan for the future.
“It's very hard to strategize in many ways because we just came out of the pandemic and we know business travel is not at the level we want and international travel is probably not at the levels we want either,” Piteira said. “There's a lot of question marks, and we are very sensitive to that because we just went through extremely difficult times in the last two years.”