U.S. budget hotels experienced a dip in performance in the initial months of this year compared to the same period last year. The decline raises questions about whether inflationary pressures are squeezing American travelers' budgets, impacting their accommodation choices.
According to CoStar's STR, a leading hospitality analytics firm, economy-class hotels in the United States witnessed a 6% decrease in revenue per available room during the first quarter, reflecting a broader trend of underperformance. Brands such as Econo Lodge, Days Inn, Super 8, and SureStay struggled to match the performance of their upscale counterparts.
Analyzing different segments reveals a mixed bag of results. While luxury and upper upscale hotels experienced slight growth, economy and midscale properties faced the brunt of the downturn, with revenue dropping by 6.5% and 4.5% respectively, as reported by STR.
Industry analysts, including Patrick Scholes and Gregory Miller from Truist Securities, highlight concerns over the weakening performance of economy and midscale hotel chains like Wyndham and Choice Hotels. However, they remain optimistic about these companies' long-term prospects pending further performance disclosures.
Survey data presents a complex picture of traveler sentiment in the face of rising inflation. While some demographic groups are adjusting their travel plans to mitigate increased costs, affluent travelers continue to prioritize leisure spending.
Inflationary pressures are prompting individuals to reassess their travel expenditure. The Harris Poll's survey for NerdWallet indicates that a significant portion of Americans are making changes to their travel plans to cope with higher expenses.
Contrary to expectations, the impact of inflation has not necessarily led to an uptick in budget hotel bookings. Instead, individuals are either spending less on accommodation or opting for off-peak travel periods. Meanwhile, those with greater disposable income are inclined towards upscale lodging options, aligning with trends observed by Deloitte.
Despite challenges faced by budget hotels, the overall demand for accommodations in the U.S. remains robust. Affluent travelers continue to plan vacations, as evidenced by the findings of MMGY Travel Intelligence's February survey, indicating sustained enthusiasm for leisure travel.
As the hospitality industry navigates economic uncertainties, the divergence in traveler preferences and spending habits becomes increasingly evident. While budget hotels grapple with subdued performance amid inflation concerns, upscale properties continue to attract well-heeled travelers, underscoring the resilience and adaptability of the sector in response to evolving consumer dynamics.
Source: Skift