The pandemic ruined the American hotel business. The recovery is different for each market and has a different pace.
Memphis' 2022 performance was better than the national hospitality recovery in a number areas. The American Hotel and Lodging Association estimates that U.S. hotels will reach 63.8% occupancy in 2023. Memphis's forecast is slightly higher at 64%.
There are still some local submarkets like Downtown where occupancy and revenue for each available room is below their pre-pandemic level.
MBJ dives into the data to tell the story of the local market, which raked in more than $650 millions in revenue in 2018.
Chuck Pinkowski is the owner of Memphis hospitality consulting firm Pinkowski & Co. and STR provides analytics and market insights to global hospitality sectors.
MBJ spoke with Memphis area hotel executives about the outlook for 2023 and what could be in store for an industry that has been battered.
Downtown Ups and Downs
In 2022, downtown Memphis hotels will continue to struggle to reach occupancy rates of 2019. The average daily rate for properties in Memphis was higher than it was before the pandemic.
Pinkowski stated that 'the occupancy rate is far ahead of what it used to be, but it is not back at the same level as before.
Downtown's hotel occupancy rate was 58.5% in 2018, compared with 69.4% for 2019. The average daily rate in the area was $178, compared to $162 last year.
These higher rates led to a surge in hotel revenue. Downtown recorded $155 million hotel revenue by 2022, compared to $139 millions in revenue for 2019.
The Memphis hotel market, which includes all submarkets between East Memphis and DeSoto County in the north up to Millington, had a higher revenue collective last year compared to figures before the pandemic.
Pinkowski stated that the revenue in 2022 would be 19% higher than in 2019.
In 2022, downtown hotels sold 873,000 rooms nights compared to 861,000 in 2019.
Pinkowski pointed out, too, that Downtown saw a 20% rise in the number of rooms available during this time period.
The new hotel properties opened during this time span included the Canopy by Hilton Memphis Downtown ($45 million), a 174-room property, which was opened during the pandemic-hit Summer of 2020. Also, the Hyatt Centric Beale Street Memphis ($75 million), which opened spring 2021, and the Caption by Hyatt Beale Street Memphis ($41 million), which opened spring 2022.
He said that the 20% increase was due to high-end hotels being added to market. These hotels were getting rates significantly higher than average.
Except for a few rare exceptions, newer, more upscale properties downtown could command a higher rate than older properties.
Pinkowski stated that 'The Peabody Hotel, Hampton Inn & Suites Memphis Beale Street and Westin Memphis Beale Street had average daily rates of $200 or more, while all the other Downtown hotels saw a drop in prices between $140 and $150. The new hotels between 2019 and 2020 were all in the $200 range for Hampton Inns and Westins. This is why [hotel revenue] in 2022 was high.
Positive vibes for market
Pinkowski stated that the local hotel market has seen occupancy rates creep closer to levels before the pandemic, and hotel earnings are higher than in 2019.
Memphis' hotel market will be at 64% occupancy by 2022. This is slightly lower than the record-breaking 66.4% in 2019 The metro area's hotel occupancy rate is higher than Downtown's.
Pinkowski stated that the Downtown market has been hit harder than the rest [of the Memphis hotel market]. The rest of the city did better than Downtown Memphis during the pandemic. Memphis did better in terms of occupancy than the rest the country during the pandemic. We watched the weekly numbers and found that the Memphis hotel market always had between three to five occupancy points more than the national average. We didn't have many of the large convention hotels that were badly affected by the pandemic.
The city's core hotel market is relatively strong when compared to the 40 largest cities in the U.S.
In this comparison, Downtown Memphis recovered 88% from its total occupancy for 2019 -- good enough to tie with four other major cities and place No. 17 nationwide.
The Memphis hotel market's average daily rate (ADR), which was $96 in 2019, will be $111 by 2022. Memphis' hotel market has seen its total revenue increase by 20.1% between 2021 and 2022, as well as 18.7% between 2019 and 2022.
Memphis' hotel industry is expected to generate $676 million more in revenue than it did in 2019, which is a significant increase from the $569 millions in revenue recorded in 2019.
Memphis' hotel market has seen a 3% rise in the number of hotel room nights sold compared to last year. In 2022, approximately 6.1 million room nights will be sold -- this is the most ever.
Pinkowski stated that 'we saw a very strong recovery in 2022. This is partly because of the increase in supply of rooms in that three-year time period from 2019'. The supply of rooms in the Memphis hotel market increased by almost 7% over a three-year span.
A strong year is in the offing
Memphis Tourism, Memphis' official destination-marketing arm, projects that the local hotel industry will continue to grow in 2023.
Ashley McHugh is the research director of the organization. She told MBJ the data from Tourism Economics which forecasts trends in the travel industry, predicts a record-high for the number of hotel rooms booked this year on the Memphis hotel market.
The local executives of the prominent hotels in the area are backing those projections.
Craig Smith, VP for brand development at Peabody Hotels & Resorts said that the stigma associated with travel becoming unsafe because of COVID-19 will fade in 2022. Travel confidence has increased, and the consumer's mentality has changed.
He said that The Peabody Hotel occupancy rates for the first quarter 2023 were far ahead of those of the same time period in 2022. Meanwhile, ADR is now on track to reach pre-pandemic levels and to surpass and match 2019 figures.
Smith stated that 'our occupancy rate has steadily improved month after month and year after year'. Memphis's strong recovery is reflected in the data for this industry's overall trend. We were pleased with how the year started. The group business and events business have far exceeded the COVID-era and leisure travel continues to grow.
The Central Station Memphis Hotel in downtown Memphis also had a good year of 2022. Amy Gray, Central Station's director of sales, marketing and operations, stated that the hotel’s ADR as well as occupancy figures both exceeded those for 2021.
Central Station, the food and beverage offerings at the station have grown since 2023.
Gray stated that '[our] occupancy rate has exceeded the 2022 reals in the first three months and is on pace for the entire year'. Gray said that corporate transients and group travel are continuing to slowly return. The social segment is keeping pace with previous years without any expected slowdown.
Candace Selecman is the general manager at the DoubleTree By Hilton Memphis. She said that despite a slow January start, occupancy and rates have been steadily increasing over the last few months in comparison to previous years. The 264-guest rooms will undergo a $5 million renovation in the fall of 2021.
We are pleased with the high occupancy rate and profitability of our room rates. Selecman stated that the fall 2021 renovation had put us on top of our recovery market. We are confident that the guest demand will increase in near future and we expect record-breaking results.