Summer 2022 is likely to be a good for travel and tourism in the US. The following five key trends are shaping the industry, with implications for hotel owners.
Leisure travel is booming
Revenue per available room (RevPAR) in the US is exceeding not only 2020 and 2021 levels, but also 2019 levels. The RevPAR outperformance is largely driven by rates. Hotels are not as full as they were in 2019, but rates have increased: the average daily rate (ADR) is 15 percent more expensive now than in 2019.
In essence, people love to travel. We asked more than 1,000 US travelers what they would do if they won the lottery, and spending on travel came in as the second highest choice (Exhibit 1).
This summer, for many, the holidays will pass “no matter what”
The survey also revealed that people are worried about macroeconomic factors such as inflation, but this is not enough to stop almost 70 percent of travelers from taking their vacation this summer (Chart 2).
Are gas prices high? People will go somewhere closer. Are hotel prices prohibitive? They will look for a deal. Consumers may find ways to cut back, but these factors will not ruin their vacation plans (Exhibit 3).
Since the survey was conducted in June 2022, travel plans have been put in place. AAA estimated that 42 million people would travel by car over the July 4th weekend, a new record for car travel volume for this period, despite national average gas prices exceeding $5.
In addition, hotel occupancy, ADR and RevPAR figures all exceeded the comparable week in 2019, and TSA checkpoint travel figures showed a 15 percent increase for the Thursday and Friday before the July 4 weekend , compared to 2019.
Guests have more lodging options than ever before
The lines have blurred between accommodation categories and travelers are looking for hotel, homestay, all-inclusive and outdoor/glamping options.
While 78 percent of travelers surveyed say they are comfortable staying in a hotel, only 61 percent are comfortable staying in alternative accommodations. The top five reasons to stay in a hotel include consistency and predictability; security and privacy; convenient location; availability of concierge, lounge, restaurant and/or other amenities; and lower cost. In comparison, travelers can choose alternative accommodation options as they offer more space; home comforts; and an authentic or local experience.
So where are these travelers planning to go? More than half (54%) plan to go to the beach, a popular choice among 25-34 year olds. The next most likely destination (32%) is a city/urban location, followed by a mountain/hiking trip (24%).
Loyalty is heating up
In this environment of higher prices and greater choice, efforts to maintain customer loyalty are intensifying. But the survey shows that many travelers, especially the younger generation, don’t think they get enough value from loyalty programs or that the programs seem too complicated.
There are some features of loyalty programs that matter more than others: offering discounts, having the right footprint so guests can stay wherever they want, and making it easy to redeem points are favorites.
ESG is gaining importance
While 75 percent of travelers surveyed agree that sustainability is important, only half would pay more for it. But younger travelers are much more willing to pay more for green initiatives. Initiatives that currently resonate best with guests include using eco-friendly cleaning products; replacement of plastic key cards with alternatives; reduced use of paper, eg electronic receipts; and smart appliances and monitoring systems to optimize energy use.
Five ways hotels could respond to these trends
- Encourage “bleisure” stays by highlighting local attractions and events. With the rise of leisure and the recovery of business travel, we expect to see an increase in leisure travel.
- Help guests find you when they’re researching their next trip. Hotels can invest in their online and social media presence to communicate with potential guests early in their research. This is especially important as hotels face labor shortages and sometimes reduce service levels – communicate transparently to ensure guest expectations are properly set before guests even set foot on the property.
- In markets with a strong supply of alternative accommodation, communicate the differentiators. Hotels can communicate what makes them better, especially comfort, consistency, and available amenities.
- Update loyalty programs. Hotels may need to review their loyalty programs to ensure they are responsive to new needs and help frequent and infrequent guests get the most out of their programs.
- Launch green initiatives with clear and consistent communication to guests. Hotels can think about how to attract green travelers and build meaningful relationships with them that lead to long-term loyalty.