Lack Of Corporate Travel Still Hindering Boston Hotels' Slog Out Of Pandemic Performance Depths
Boston hotels are still feeling the sting of a lack of corporate travel but are slowly climbing out of their massive performance lows of last winter, new research shows.
The Boston hotel market had an occupancy rate of 58% and an average daily rate of approximately $210 while revenue per available room, or RevPAR, was $121, down 36% from November 2019, according to preliminary data from Pinnacle Advisory Group. Corporate travel, which made up the majority of lodging demand in Boston and Cambridge at 35% in October 2019, sat at a paltry 11% in October 2021.
The delta and omicron variants of the coronavirus and continually shifting return-to-work plans have dampened business travel, Pinnacle Advisory Group Vice President Sebastian Colella said. Leisure travel, which in October made up 66% of hotel demand, will begin to slow as the holidays approach and Boston-area events like graduations and the first-ever fall running of the Boston Marathon are in the rearview mirror.
“Our recovery started much later than most markets,” Colella said. “We really didn't begin to chip away at our recovery until July or August. It sort of all came together between September and November.”
Boston remains at the back of the hotel recovery pack, along with other major metros like New York City, San Francisco and Washington, D.C., Colella said. Hotel leaders were expecting a slight boost in November with the return of international travel, but Boston was still on track for a dismal 2021.
Boston was identified in an August report among the top 10 U.S. markets projected to end the year with the largest decline in hotel business travel revenue, according to American Hotel and Lodging Association and Kalibri Labs research. Boston was forecast to make $190M in hotel business revenue this year, down 88% from $1.6B in 2019.
New supply, like the Omni Boston Hotel’s 1,054 rooms and suites, injects new demand but also negatively impacts hotel performance metrics, Colella said.
“We are experiencing above-average supply growth at a time when demand is extremely low,” he said. “It just mitigates our ability to recover.”
Boston officials, mindful of the industry struggles, in August voted to enact a new 1.5% fee on hotel bills to bolster the tourism industry and promote business travel to the Boston metro. The fund is projected to raise $10M in its first year and as much as $30M annually in years to come.
Other areas of the country, like the Sun Belt, are enjoying a wave of demand in some cases exceeding pre-pandemic levels, JLL Global CEO of Hotels and Hospitality Gilda Perez-Alvarado recently told Bisnow. Still, the emergence of the omicron variant pushed back projected hotel industry recovery into 2023 at the earliest.