REIT earnings show strong group and business travel demand

Dive Brief:

First-quarter earnings statements from several real estate investment trusts cited industry trends including increased occupancy and rate pricing, along with growth in the group business segment, for generating strong first-quarter results.
Summit Hotel Properties’ RevPAR increased 19.3% in the first quarter as compared to the same period in 2022, while Host Hotels & Resorts reported its RevPAR increased 31% over the first quarter of 2022.
While leisure travel demand remains strong across the industry, group and business demand is driving stronger-than-expected performance in the first quarter for REITs, resulting in improved outlooks for the year.

Dive Insight:

Much of the hotel industry’s recent growth has been attributed to leisure travel demand, but group and business demand is also on the rise and is positively impacting first-quarter results, as noted by real estate investment trusts — Summit Hotel Properties, Host Hotels & Resorts, DiamondRock Hospitality Company and RLJ Lodging Trust — in their earnings statements.

"While leisure demand remained robust during the first quarter and nearly all leisure-oriented markets and metrics continue to meaningfully exceed 2019 levels, the recovery in our business is increasingly driven by non-leisure demand segments, most notably business transient and group demand, particularly in urban and suburban markets," said Jonathan Stanner, Summit president and CEO, during the company’s earnings call.

He added that the increased group- and business-oriented demand positions the REIT’s portfolio — of which about half is located in urban markets — “particularly well for this new phase of growth." According to its earnings statement, Summit’s RevPAR increased 19.3% to $118.18 compared to the first quarter of 2022, while ADR increased 11.2% to $171.63 and occupancy increased 7.3% to 68.9% year over year.

DiamondRock’s RevPAR for the first quarter of 2023 was $185.26, a 16.9% increase over the same period in 2022 and a 13.8% increase over Q1 2019. During the company’s earnings call with analysts, Mark Brugger, DiamondRock’s co-founder, president, CEO and director, shared performance metrics for some of the company’s group-centric hotels: RevPAR at the San Diego Westin increased 71% year over year; at the Chicago Marriott, it increased 62% over the year-ago period; and at the Boston Western Seaport, RevPAR increased 40%, “which impressively was more than 10% over its prior first-quarter peak,” he added.

Brugger also noted that “business transient demand has also rapidly recovered. Midweek business transient occupancy at urban properties increased 50.8% in the first quarter from the comparable period.”

Among other recent REIT earnings, Host Hotels & Resorts reported RevPAR increased 31% in Q1 compared to the first quarter of 2022, according to its earnings statement. The lodging REIT also reported that banquet and catering revenues per group room night exceeded 2019 by double digits, further illustrating the impact of group business.

RLJ Lodging Trust reported Q1 RevPAR of $136.45, an increase of 27% from the first quarter of 2022. “We are pleased to see the positive momentum in lodging fundamentals continue, especially in urban markets which benefited from further improvement in business travel, strong group demand, healthy leisure and rising international travel,” said Leslie Hale, RLJ Lodging Trusts’ president and CEO, in the company’s earnings release.