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Recovery For D.C.'s Tourism Industry Expected To Take At Least 4 Years

The tourism industry in the nation's capital continues to suffer from the pandemic-related drop in travel, and D.C. leaders now expect it could take several years for visitation to return to normal levels. 

Destination DC President Elliott Ferguson on the organization's virtual meeting.

International tourism to D.C. is not expected to rebound to pre-pandemic levels until 2024, Destination D.C. President Elliott Ferguson said Wednesday at the organization's annual Marketing Outlook Meeting, which was held virtually. 

The District has also faced a sharp drop in visitors from within the U.S. Roughly 11 million domestic visitors are projected to travel to D.C. this year, compared to 22.8 million last year, Ferguson said, citing Tourism Economics data.

"We’ve all been faced with a massive blow, and it's hard to plan and promote travel, realizing that visitors are not necessarily able to come to Washington because of the need to quarantine from individual states," Ferguson said. 

In the near-term, he said the agency is focused on promoting D.C. to people in the region who can visit by car, as people remain hesitant to fly on planes because of the coronavirus pandemic. He said 50 million people live within a four-hour drive of D.C.

"The data tells us that consumers are looking at shorter trips, staycations and getting in a car and driving versus getting in a plane," Ferguson said. "We know consumer confidence has been compromised at this point, so we'll focus on that driving market."

The city's hospitality industry has also been hurt by the lack of conventions this year. Ferguson said 42 large events have been canceled in the District, resulting in the loss of $422M in economic activity. He said convention business will likely be slow to return, so Destination D.C. is focusing on booking events years in advance. 

The District already has 21 citywide conventions scheduled for 2022, 18 citywide conventions for 2023 and 20 citywide conventions for 2024. He said it has landed five future citywide conventions during the pandemic, including the Delta Sigma Theta annual convention in 2025 and the Lion's Club national meeting in 2027, each expected to bring roughly 25,000 visitors. 

Destination D.C. is also looking ahead to a big potential tourism opportunity in 2026: the FIFA World Cup. D.C. announced in June it is launching a bid to host the global soccer tournament. Ferguson said it could generate $230M in economic impact for the city. 

"This is a really big deal for our city," Ferguson said of the World Cup. "Think $230M in economic impact and a global community, at least half of the U.S. and the world looking at the World Cup and having the opportunity to promote D.C., which is really good for us."

The drop in tourists and conventions this year has had a major impact on D.C.'s hotel industry, which is also expected to take several years to recover. 

A chart from Jan Freitag's presentation showing hotel occupancy in the D.C. Metro area this year.

STR Senior Vice President of Lodging Insights Jan Freitag said during the Destination D.C. meeting that hotel occupancy in the D.C. Metro area has rebounded from April, when it averaged 20.2%, to 35.6% in July.

Hotel occupancy has been lower in D.C. proper, which STR calls the Central Business District. Occupancy in the District fell as far as 10.8% in April and reached 23.6% in July. Tourism Economics projects occupancy in the District will average 54% in 2021. 

"This is clearly a function of lack of corporate transient and corporate group demand," Freitag said of the D.C. occupancy numbers. 

Freitag, in an interview with Bisnow after the presentation, said the demand for D.C.-area hotels in recent months has largely come from regional tourism, and he thinks that could drop off this month. 

"Leisure demand has been the driving force behind the demand numbers, and unfortunately those were good while it was summer, in July and August, but the big question is what is going to happen after Labor Day, when people stay closer to home because their kids are in school," Freitag said.

He added that it is possible parents working remotely with kids taking virtual classes could still plan trips in the fall, but that remains to be seen. Freitag also said the lack of international travel has hurt the D.C. hotel market. 

"For a gateway market like D.C., the chair has multiple legs. International demand is tourists, governments, associations and people that interact with government and associations," Freitag said. "That is a really important part for D.C." 

This drop in demand is having a major impact on hotel owners' bottom lines. Revenue per available room, a key hotel industry metric, is projected to average $46 in the District this year, compared to $172 last year, according to Tourism Economics. It projects RevPAR will average $105 next year.

STR projects room demand in D.C. will return to 2019 levels by 2023, but because room rates will remain lower than normal, it expects it will take until 2025 before RevPAR returns to pre-pandemic levels. 

"Things are getting better, but it's just going to take us quite a while to get back to normal," Freitag said.