Atlanta hotel market improving, but COVID surge and slowdown in corporate travel still ‘hurting recovery’

Atlanta Business Chronicle – Atlanta’s hotel market recovery is slowing, as U.S. companies pull back on corporate travel amid a surge in COVID-19 cases.

The metro area’s occupancy rate stood at 57% in June, according to Kalibri Labs, a data analytics firm focused on hospitality. That’s a major improvement from last year when analysts were forecasting occupancy for U.S. hotels to be worse than the Great Depression.

A market is generally considered healthy for investment and development when occupancy ranges from 70% to 80%. Atlanta hasn’t seen those levels since 2019.

Mark Woodworth, principal at R.M. Woodworth & Associates, said corporate travel has yet to come back.

“It’s hurting the recovery from that particular segment,” he said.

The Delta variant and spike in COVID-19 cases have created a “headwind” for hotel owners and operators still recovering from last year, Woodworth said.

Even so, there have been bright spots for the market this year, including growth from pent-up demand for leisure travel. Capital has been flowing into deals for resorts. And, hotel landlords in U.S. urban markets including downtown Atlanta are testing investor appetite. Earlier this month, Schulte Hospitality Group purchased The W Atlanta-Midtown for $160 million. In Buckhead, two new hotels are opening.

Confidence in the hotel market’s rebound depends on the property type, CBRE Executive Vice President Tim Dick said. Convention hotels are typically struggling more than resorts. For example, he said a popular Savannah hotel reported higher occupancy during the first half of this year than in 2019.

Hotels in tourist destinations “are doing .. much better,” Dick said.

Some of the nation’s biggest publicly traded hotel companies are seeing encouraging numbers this year. Marriott International Inc. reported second quarter net income of $422 million, compared with a net loss of $234 million in the same period last year. InterContinental Hotel Group PLC reported some rates are back to 2019 levels, even though overall second quarter revenue fell 44%.

Paul Edgecliffe-Johnson, chief financial officer and group head of strategy, told analysts Aug. 11: “Occupancy and rate continued to improve in July with nearly 50% of our hotels achieving (revenue per available room) above 2019 levels … Our recovery in the second quarter was driven by domestic leisure markets.”

It’s still uncertain how the Delta variant spike impacted business in August, normally a slow month as vacations end and students return to school.