Leisure Travel Carries Baton For DFW Hotel Recovery As Corporate Travel Struggles To Get Off The Blocks
As corporate travel makes a sluggish comeback, Dallas-Fort Worth hoteliers have turned to leisure travel to make up for lost revenue and reduced occupancy.
DFW is one of only two statewide metro areas where Q3 revenue lagged behind the same period in 2019 before the coronavirus pandemic took hold, according to the latest Hotel Brand Report from Source Strategies. Hospitality industry experts say this is because the Metroplex has historically relied on corporate travel, which is making a slow rebound after grinding to a halt in early 2020.
The Sam Moon Group owns hotels across the area and is building downtown's first-ever JW Marriott in downtown’s Arts District. The company’s Renaissance Hotel at Legacy West in Plano used to see its heaviest traffic Monday through Thursday, but that has changed since the pandemic started.
“Now, our weekends are always packed; we are at full occupancy,” said Daniel Moon, general counsel and vice president. “Our weekdays are much better, but we aren’t back to what it was pre-Covid.”
Gorka Amian, director of data strategy and analytics for Kalibri Labs, said upper-tier hotels in urban core areas suffered the most due to the lack of corporate travel. These properties are having the hardest time catching up to pre-Covid levels, he said.
“You don’t see luxury and upscale hotels in the outskirts of town; you see them in the urban areas,” Amian said. “For that reason, the corporate travel and the groups, when they stay, they stay in the urban areas, they stay in those hotels.”
Kalibri Labs data, incorporating the majority of hotel supply in DFW, shows overall hotel occupancy in October landed at just over 60%, a nose above the national average. During the same month in 2019, DFW occupancy was closer to 70%, according to Kalibri data.
But where DFW struggles in comparison to the rest of the nation is in its average daily rate. In October, guest ADR in DFW came in at just under $120. The national average was closer to $140 per day.
These two factors determine a hotel’s revenue per available room, Amian said. According to the Source Strategies report, the Dallas metro had a Q3 revenue per available room of $59.72, which is about $11 less than the same period in 2019.
The lack of corporate clients has prompted hotel owners in DFW to shift their focus toward other types of travelers, according to Kevin Donahue, first vice president of CBRE’s Hotels Advisory Group.
“There’s a lot more leisure travel, and they are marketing to guests that they historically haven’t had to market,” he said. “They are just trying to get heads in beds.”
Mark Thompson, executive director of Visit Plano, said his organization responded to the pandemic by redirecting marketing dollars toward travelers within a 300-mile radius of Plano. The analytics were telling: In 2020, Visit Plano ads generated 42 million impressions and 400,000 clicks, Thompson said.
“That’s a lot of people who were clicking back to look at what we had to offer,” he said. “We would like to think that had an impact on weekend traffic.”
According to data from CBRE, occupancy at Plano hotels is almost back to pre-pandemic levels. In the third quarter of this year, 65.42% of rooms were occupied. This is down just slightly from the 66.15% occupancy rate during the same quarter in 2019.
Frisco, which is also a corporate travel hub, leaned into events as a way to bring visitors to the city. Visit Frisco Executive Director Marla Roe said her team helped relocate five major sporting events to the area, which generated $13M for the city.
Among those events were the NCAA’s National Invitation Tournament as well as International Ice Hockey Federation’s U18 World Championships, Visit Frisco Senior Communications Manager Wesley Lucas said.
“Those certainly provided a bump in occupancy and some economic impact for our community in a time when there really wasn’t a lot going on,” she said.
Hotel occupancy in Plano and Frisco are tracking ahead of Downtown Dallas, which had a rate of 44.45% in Q3, according to CBRE. But that could change in 2022. A fully booked calendar for Dallas' Kay Bailey Hutchinson Convention Center signals a strong comeback for corporate travel in the new year, according to Downtown Dallas Inc.
Craig Davis, president and CEO of Visit Dallas, said he is bullish about the recovery of Dallas’ hotel tourism economy in 2022.
“October revenues are 90% of the revenues of the same month in 2019, and that is without the return of corporate travel in any meaningful way,” he said. “Next year’s groups on the books rival 2019. We expect a full recovery by the end of next year in terms of revenue.”
In the meantime, many hotels downtown have zeroed in on those who go on staycations, said Doug Prude, DDI's manager of economic development and opportunity.
“When businesses stopped traveling, hotels really started entertaining residents and people coming from 300 miles or closer for a staycation, if you will,” he said. “They were giving away deals to a lot of folks who live nearby as a method of survival."
Brooke Beilby, general manager for downtown’s Hilton Garden Inn, said the pandemic completely upended the way her hotel does business. She had to rethink everything, from how to provide services to the leisure traveler to how to staff for short-notice bookings.
“If you’re sitting Friday with 50 rooms to sell, you make sure you have absolutely all hands on deck Saturday and Sunday, because you’re going to fill them, and you’re going to have a huge departure on Sunday,” she said. “So, from a service standpoint, we had to quickly learn to react to that.”
Beilby's Hilton launched a Road Trip Rate program, which incentivized travelers within driving distance to visit the hotel during a time when airline travel was still seen as risky by some. The rate provided a 20% discount to guests from any states contiguous to Texas, Beilby said.
“We went from filling our hotel Monday through Thursday with your normal corporate guests, who are flying in and taking an Uber, to an overwhelming [amount of] drive-in guests,” she said. “That was reflected not only in the success of the road trip rate, but our valet revenue this year has been absolutely unprecedented, which we didn’t really see coming.”
DFW’s hotel industry is poised to see improvement in the new year, mostly due to factors such as supply chain disruptions and limited financing that are affecting the amount of new construction in the pipeline, Donahue said.
“We are just seeing a reduction in new supply that is coming online over the next couple of years, so I think that will be beneficial for the hotels that have recently opened and the existing supply,” he said.
Many tourism experts agree that DFW hoteliers will shift their focus back to corporate travel once it returns in full. Others see the increase in leisure travel as a permanent change and one that could pose an opportunity to realize booking revenue 365 days a year.
“Our weekends and our weekdays are going to be very similar, and that would be the ideal thing because you don’t want to just have corporate on the weekday and be dead on the weekend, and vice versa,” Thompson said.