By Ryan Kawai Sanchez
The average length of stay in hotels has undergone a notable shift since the onset of the COVID-19 pandemic. Many travelers have opted to extend their hotel stays for longer durations.
According to industry reports, the average length of stay in hotels has increased by approximately 20 to 25 percent compared to pre-pandemic levels. This trend has been observed across various hospitality industry segments, including leisure and business travel.
According to forecasts, the hotel industry in the United States is expected to surpass its pre-pandemic record with 1.3 billion occupied room nights in 2023. This projection indicates a significant increase of 56.9 percent from the lowest point in 2020, which was 831.64 million occupied room nights. From 2021 to 2022, the demand for hotels experienced an improvement of 11.1 percent.
In April 2020, over 75 percent of hotel rooms in the country were unoccupied, as reported by STR. However, three years later, the hotel industry has significantly recovered and is expected to continue this positive trend in the coming year.
The average hotel occupancy rate in the United States is projected to be 63.8 percent in 2023, a remarkable improvement from the historic low of 43.9 percent in 2020. In 2022, U.S. hotels experienced a significant boost in occupancy rates, reaching 62.7 percent, which represents a nine percent increase from 2021.
Most analysts predict that GDP growth will be flat in 2023. According to Costar Group, forecasts for the hotel sector predict a two percent increase in occupancy and a three percent increase in average rates, for a five percent increase in RevPAR. Naturally, the results will differ depending on the market and the property type, but all should see positive development.
The market size for hotels and motels in the United States is continuously increasing. On average, the industry has experienced a yearly growth rate of 7.7 percent between 2018 and 2023 in terms of market size. Additionally, according to IBIS projections, the hotel and motel industry is anticipated to grow by 17.9 percent in market size in 2023.
Why is the environment improving?
The tourism and hotel industries are closely related as they both heavily depend on domestic and international travelers. Since travel and tourism are back at all-time highs, the hospitality sector is thriving, recovering quickly from the detrimental effects of COVID-19.
The United States boasts numerous prominent urban centers, which serve as popular tourist destinations and play a crucial role in the nation’s hospitality sector. In June 2022, some of the most popular U.S. cities — including Miami, New York City and Las Vegas — had the highest hotel rates.
The increase in blue-collar jobs is a major contributor to the higher demand for extended-stay hotels. These hotels provide affordable and convenient accommodations for workers hired for temporary or contract-based positions.
With access to amenities like kitchens and workspaces, extended-stay hotels have become a popular alternative to rental apartments or long-term hotel stays. As a result, many developers and operators are investing in this market segment, recognizing the potential for strong returns on investment.
Another factor contributing to the increase in the average length of stay is the rise of remote work. With more people working remotely, some are taking the opportunity to work from different locations, including hotels. This has led to the emergence of the “workcation” trend, where people combine work and leisure by staying in hotels for extended periods while still being able to work remotely.
What’s the impact?
The shift in the average length of stay has significant implications for the hospitality industry.
Hotels can now attract longer-term guests, which can help them offset the losses incurred by decreased occupancy rates. Furthermore, longer stays can lead to increased revenue for hotels, as guests are more likely to utilize hotel amenities and spend more on food and beverage.
This uptake in demand has also been great for employment, especially in major tourism cities. Last year, there was an increase in the number of workers who entered the labor force in Orlando, New Orleans and Las Vegas, which resulted in more open positions being filled in restaurants, bars and hotels. This trend was not limited to those areas, as employers in leisure and hospitality across the United States have been actively hiring, contributing to a surprisingly robust labor market despite concerns over rising interest rates and inflation.
The COVID-19 pandemic has disrupted the travel industry in many ways, including the average length of stay in hotels. While this trend may have initially been driven by safety concerns, it has also presented new opportunities for hotels to attract longer-term guests and generate more revenue.
As the sector continues to grow, it will be interesting to see how this trend evolves and how hotels will continue to adapt to meet the changing needs of travelers.
Ryan Kawai specializes in the disposition and acquisition of hospitality assets, focusing on hotels and motels. His network of hotel operators ranges from independent to corporations, including G6 Hospitality, Wyndham, Choice Hotels, Best Western, Hyatt, Mariott, private equity funds and developers.