Hotel trends that drove Q4 revenue, portfolio growth

The fourth quarter of 2023 posed several challenges for hotels. But in the face of adversity, operators remained optimistic on travel demand and found solutions to drive continued revenue and portfolio gains.

Choice Hotels International and Wyndham Hotels & Resorts jumped through hoops on the regulatory front. Following Choice’s public bid to acquire its peer in October — and Wyndham’s subsequent rejection of the deal — the Federal Trade Commission began an investigation into antitrust concerns surrounding the proposed merger.

During the fourth quarter, Choice and Wyndham engaged in a public back and forth that generated reaction from shareholders, franchisees and industry professionals alike. But despite their public battle, both companies came out of 2023 with strong performance results. Choice posted record revenue, while Wyndham reported record organic rooms growth.

Industrywide, hotels felt a pinch on the lending front as sourcing construction financing remained challenging. Because of this, many developers and owners turned to hotel conversions as a cost-effective and fast way to build portfolio scale.

In the quarter, IHG Hotels & Resorts opened the first location of its newly launched midscale conversion brand, Garner. And for the full year, conversions represented 39% of IHG’s openings and 36% of signings. Similarly, Marriott reported that conversions accounted for 25% of its organic room additions and 40% of organic rooms signed in 2023.

Choice also saw strong momentum on the conversion side, with its global pipeline for conversion rooms increasing 16% year over year in the fourth quarter.

Hotels remained bullish on the burgeoning luxury and lifestyle segment, with Hyatt Hotels Corporation, Hilton and IHG expanding their pipelines in the space. Accor posted 8% year-on-year RevPAR gains in the segment in Q4.

Hotel companies were also focused on midscale, with Hyatt specifically adding hotels to its Hyatt Studios pipeline and breaking ground on the newly launched upper midscale extended stay brand’s first location.

Marriott similarly expanded the pipeline for its midscale extended stay brand, StudioRes, which launched in June. And the hotel company plans to further grow in the segment with a U.S. transient midscale brand that’s in the works, Marriott President and CEO Anthony Capuano said in the company’s earnings call.

Coming out of 2023, most major hotel operators expressed optimism about the state of travel demand and expect a healthy appetite for travel to contribute to revenue and portfolio growth in 2024.

Las Vegas operators were particularly enthusiastic about visitation to the market following the success of Formula 1’s inaugural Las Vegas Grand Prix race in November.

MGM Resorts, Wynn Resorts and Caesars Entertainment all forecasted the city’s robust events calendar in 2024, including Super Bowl LVIII held earlier this month, would drive increased revenues. The operators also noted group travel, which has been heightened nationwide, as a growth driver.