Tag: lodging

Choice Hotels International has purchased Wyndham Hotels & Resorts shares and plans to nominate directors to serve on Wyndham’s board as part of its push to acquire the company, according to a Reuters report. 

Choice in October publicly offered to acquire Wyndham in a $7.8 billion deal, but Wyndham rejected that offer, as well as an “enhanced” offer last week. 

Purchasing shares would allow Choice to nominate directors to Wyndham’s board by January 2024, according to Reuters. Should Wyndham continue to reject Choice, Choice could nominate a slate of directors that could approve the deal and ask shareholders to choose.

According to Reuters, which cited sources, Choice already has begun interviewing potential board nominees and is “preparing” an offer to “show Wyndham’s investors that there is a firm offer on the table.”

Choice and Wyndham each declined comment on the Reuters report.

Average daily rate and revenue per available room among U.S. hotels in October increased year over year as occupancy fell, according to hotel analytics firm STR. 

October U.S. hotel ADR was $161.56, up 3 percent year over year and slightly above September’s $160.18. RevPAR was $106.38 for the month, up 1.2 percent year over year and up slightly from September. 

U.S. hotel occupancy in October was 65.8 percent, down 1.8 percent year over year and down from September’s 66.2 percent.

While the U.S. hotel industry in October reported “mixed performance results from the previous month,” according to STR, results among STR’s top 25 markets remained steady. 

New York City again reported the highest occupancy level for the month at 86.8 percent, up 3 percent year over year. Houston had the lowest occupancy among the top 25 markets in October at 59.5 percent, with St. Louis next at 59.8 percent. 

Additionally, STR’s top 25 markets “showed higher occupancy and ADR than all other markets,” the company said.

RELATED: STR September U.S. hotel data

Wyndham Hotels & Resorts’ board of directors has rejected Choice Hotels International’s revised proposal to acquire the hotel company, calling Choice’s latest offer a “step backwards” in negotiations, the company said Tuesday.

Wyndham last month rejected Choice’s original cash-and-stock proposal of $90 per share, roughly totaling $7.8 billion. After a month of what Wyndham called stalled conversations, Choice in a letter to Wyndham’s board submitted an “enhanced” offer. Choice didn’t increase its per-share offer, which Wyndham calculated at about $86 per share given Choice’s lower stock price. 

Choice’s offer includes $49.50 per share in cash and 0.324 shares of Choice stock. 

Choice’s latest letter was not advancing the conversation, but rather “represents a step backwards despite being delivered nearly a full month after you decided to unilaterally go public with your unsolicited proposal,” Wyndham wrote in a response letter to Choice.

“Choice continues to ignore our major concerns around value, consideration mix, and asymmetrical risk to our shareholders given the uncertainty around regulatory timeline and outcome,” Wyndham chairman Stephen Holmes said in the letter.

While Choice’s latest bid represents a lower purchase point, the company did include a layer of protection for Wyndham shareholders—which Wyndham has said is required—should federal regulators deny the deal or require concessions. 

Choice president and CEO Patrick Pacious in a Nov. 14 letter to Wyndham indicated Choice would include a $435 million termination fee and a “ticking fee” of 0.5 percent of the purchase per month in the case of regulatory delays. Additionally, “Choice agrees to take any actions required by antitrust regulators to close so long as such actions would not have a material adverse effect on the combined company,” according to Pacious.

This additional element, however, did not sway Wyndham. Holmes called the termination fee “low” and indicated the two-year period for Choice to obtain regulatory approvals “would both create a prolonged period of limbo and expose Wyndham and its shareholders to significant asymmetrical risk.” 

RELATED: Choice Bids $7.8B for Wyndham

Average U.S. daily hotel rates in 2023 trended higher than projected, according to STR and Tourism Economics, which on Monday increased its growth forecast for 2023 U.S. revenue per available room while slightly downgrading occupancy projections.

For 2023, STR and TE raised their RevPAR projection by 0.3 percentage points from its previous forecast, issued in August, due to a “lift in ADR growth,” according to STR. 

The companies held their forecast for 2024 steady from their most recent outlook.

“Our latest projections reflect the continued buoyancy of travelers, as room rates outperformed our previous forecast, which built in a mild recession,” STR president Amanda Hite said in a statement. 

STR and TE now project full-year 2023 RevPAR of $97.84, up 4.8 percent year over year—up 0.3 percentage points from the previous forecast’s 4.5 percent. The companies project 2023 ADR of $155.47, up 4.2 percent year over year, and a 0.6 percentage-point increase from the previous forecast.

“Travel sector improvements, including stronger group activity and returning international visitors, will help offset economic factors, supporting still-solid RevPAR gains,” TE director of industry studies Aran Ryan said in a statement. Economic factors that could deter growth include tighter fiscal policies and higher interest rates, according to Ryan.

While still projected to increase year over year, U.S. hotel occupancy for 2023 was downgraded slightly from STR and TE’s previous forecast, and now is forecast to be 62.9 percent, up 0.6 percent year over year. This is 0.2 percentage points lower than their previous forecast.

2024 Outlook

Looking at 2024, “each of the key performance metrics remained flat from the previous forecast due to the above long-term average trends beginning to stabilize,” according to STR. 

For 2024, STR and TE project ADR to increase 3 percent year over year to $160.16, and RevPAR to increase 4.1 percent to $101.82. The companies forecast occupancy to increase 1 percentage point year over year to 63.6 percent.

RELATED: STR/TE August forecast

Following “stiff headwinds” to U.S. hotel demand and pricing power this year, CBRE Hotels Research has lowered projections for 2023 revenue per available room but foresees improvement in 2024 as challenges moderate and international travel increases, the company said Thursday.

Some of those headwinds to demand and pricing power this summer included yet-to-recover inbound U.S. travel and Americans opting for “short-term rentals or other alternative forms of lodging,” Rothman said. CBRE head of hotel research and data analytics Rachael Rothman said in CBRE’s November Hotel Horizons report.

CBRE now projects 2023 RevPAR of $96.34, up 3.8 percent year over year but down about 31 cents from its previous forecast in August.

CBRE’s also lowered projected 2023 average daily rate from its prior forecast. The company now expects 2023 ADR to increase 3 percent year over year, down from its previous forecast of 3.6 percent. These lower rate expectations result from decreased occupancy levels, according to the report.

In Q3, “demand declined for the second quarter in a row as ADR growth was the slowest since the post-pandemic recovery began in the first half of 2021,” according to CBRE. “Softer-than-expected demand and more modest pricing power resulted in RevPAR declining 0.3 percent nationally, the first quarterly decline during the post-pandemic recovery cycle,” the company said.

However, CBRE is “optimistic” that inbound international travelers will “boost occupancy and pricing power back toward their historical trend lines,” CBRE head of global hotels forecasting and senior economist Michael Nhu said in the report.

Looking Ahead

CBRE forecasts 2024 RevPAR to increase 3 percent year over year, driven by higher occupancy and ADR. CBRE projects 2024 RevPAR to exceed 2019 levels by 14 percent.

As for ADR, CBRE expects 2024 daily rates will increase 2.3 percent year over year. Occupancy also is projected to rise as CBRE forecasts it to increase year over year by 40 basis points in 2024.

These expectations are based on CBRE’s hotel KPI data as of Sept. 30 and macroeconomic forecasts as of mid-October, the company said. 

RELATED: CBRE’s Q2 report

Short-term accommodation provider Sonder’s third-quarter revenue per available room, average daily rate and occupancy all slipped year over year as the company continues to change its product mix and its corporate sales and pricing strategies, Sonder co-founder and CEO Francis Davidson said during a Wednesday earnings call.

Davidson outlined a Sonder initiative designed to hold the line on pricing instead of using advance discounts to bolster occupancy.

“Several factors came into play this quarter, including broader travel industry trends, product mix between hotel and apartment-style properties, geographic mix, cohort mix and the impact of our corporate sales and pricing strategies,” Davidson said.

In Q3, Sonder’s RevPAR was $153, down 3 percent year over year and below the $164 it reported last quarter. Sonder’s ADR also slipped in the quarter, down 2 percent year over year at $185.

Occupancy in Q3 was 83 percent, down 1 percentage point year over year, but a slight increase from the 82 percent reported in the second quarter.

Changing Sales Efforts

Sonder in the third quarter continued to see “strong demand” for its properties in Europe and the Middle East, Davidson said, with those markets reporting 14 percent year-over-year RevPAR growth. 

As for North America, RevPAR at those properties remained “flat,” he said. This region also resulted in a “negative impact” for the company as Sonder reported some “slower starts” in new property openings. While it typically takes time for new properties to ramp up, Davidson said, this is a “larger drag than we’ve seen in the past,” primarily due to a “greater proportion of properties that rely heavily on B-to-B sales.”

To this end, Sonder is investing in local sales teams in some locales, Davidson said, adding that the company is seeing “early signs of success from this initiative.”

The company’s B-to-B sales efforts are “regaining momentum,” according to Davidson. These efforts include the company’s new VP of sales, Chad Fletcher, joining in August and an “acceleration” in forward bookings, Davidson said.

Looking ahead, the company expects its corporate segment to bolster sales “primarily in urban markets” and during weekdays, Davidson said. 

In Q3, Sonder “leaned into” a new pricing strategy that eschewed using advance discounts to boost occupancy, Davidson said. This strategy allows the company to have “greater pricing power” earlier and throughout the booking window, he said.

Previously, “within 7 days or 14 days before target dates, we would go and reduce price to drive more occupancy, and we actually think that’s not the right approach,” Davidson said. “Building a base of occupancy earlier into the booking window, but then holding price as we approach that date of arrival is actually a better strategy to drive stronger ADRs and stronger RevPARs. … I think there are some dates where we’ve been selling out a little bit too early, and that’s caused our capacity to yield optimally to be impaired.”

Product Mix

The company continued to see “relative strength” in its hotel product, a sector which it entered with the July launch of its Powered by Sonder hotel collection, and “moderate pricing pressure,” for its apartment product.

Third-quarter RevPAR at Sonder’s hotel product increased 8 percent year over year, while RevPAR at its the company’s apartment-style lodging sector grew by 1 percent year over year. 

“This bifurcation is representative of the market trends with hotel RevPAR growing year on year but alternative accommodation RevPAR decreasing across our geographies, particularly in North America,” Davidson said. Hotels now make up 40 percent of Sonder’s product mix, compared to approximately 30 percent last year, Davidson added. 

While Q3 hotel growth outpaced Sonder’s apartment-style products, “RevPAR for our hotel properties tends to be slightly lower than our apartment-style properties,” Davidson said, explaining that the shift towards hotel properties “had a roughly 1 percent negative impact on our year over year RevPAR growth,” he added.  

Additional Q3 Results

In Q3, Sonder’s live units grew 31 percent year over year to 11,800 and increased by approximately 700 units from the previous quarter. 

Sonder continued its plan, set out in June 2022, to proactively reduce its planned signings and drive growth primarily through conversion units. Sonder executives also detailed a property initiative in which the company works with landlords, assess properties and explores “alternative solutions” to reduce “drag” on its bottom line. 

Sonder’s Q3 revenue was $161 million, up 29 percent year over year. This growth was attributed to a 33 percent increase in bookable nights, and Sonder’s live-unit growth, Davidson said. 

RELATED: Sonder Q2 results

PwC softened its projections for U.S. hotel occupancy in 2023 and 2024 amid economic concerns and an uncertain outlook for corporate travel, according to a report the company released Monday. U.S. average daily rates should increase in each year, according to the company.

PwC projects full-year 2023 occupancy for U.S. hotels to reach 63 percent, up 0.7 percentage points year over year, according to its latest Hospitality Directions outlook. This projection is slightly below PwC’s prior forecast of 63.4 percent, issued in May 2023, and reflects declining occupancy numbers during the last half of 2023.

“Occupancy levels have declined in each of the past seven months, relative to comparable 2022 levels, and are expected to continue to be down during the remainder of this year and through at least the first quarter of 2024,” according to PwC.

With that said, “ADR will remain the driver for moderating” revenue per available room gains, according to PwC. 

Full-year ADR in 2023 now is expected to be $155.92, up 4.5 percent year over year. The revised outlook represents an increase in PwC’s previous projection of a 4.1 percent increase to $155.21. PwC now projects full-year 2023 RevPAR to be $98.25, up 5.2 percent year over year, but slightly below the company’s previous forecast of $98.42.

Full-year 2023 rate increases are projected to be more moderate when compared with the double-digit-percentage rate hikes reported in 2021 and 2022, according to the report.  

Some challenges to the outlook for U.S. hotels include increasing geopolitical tensions and macroeconomic risks, according to PwC.

“A liquidity crunch, labor market concerns, tight monetary policy, and the war in Israel are resulting in a worsening short-term outlook for the U.S. economy,” according to PwC.

Looking ahead to 2024, “the outlook for midweek travel remains unclear with some companies indicating changes to their business travel policies in efforts to tighten corporate budgets, as well as achieve sustainability goals,” according to PwC.

PwC expects full-year U.S. hotel occupancy to reach 63.2 percent, up 0.3 percentage points year over year. With occupancy levels “expected to be relatively flat in 2024,” most performance gains will be derived from ADR, according to the report. 

ADR in 2024 is expected to be $159.64, up 2.4 percent year over year. RevPAR in 2024 is expected to be $100.93, up 2.7 percent year over year and up nearly “117 percent of pre-pandemic levels,” according to PwC.

RELATED: PwC’s May report