JLL: Domestic leisure travel sees record demand, higher rates

Following two tumultuous years of lockdowns and travel restrictions, the domestic resort and leisure markets have emerged as the darlings of the hotel industry recovery. U.S. resorts benefited from increased drive-to leisure demand in 2021, which resulted in unprecedented levels of demand, historic rate growth and meaningful improvements in profitability. 

Pent-up demand following two years of lockdowns, coupled with uncertain expectations of traveling abroad and the new normal of remote working, has fueled the desire to re-explore the U.S.   

Today, there are two distinct groups of domestic travelers: legacy warriors, those who typically travel within the country and often visit drive-to destinations, and international travelers, who are now rediscovering the U.S. as ever-changing global restrictions and requirements hamper overseas travel plans and reservations about uncertain geopolitical climate remain.

Also driving demand is the re-emergence of social events. Most planned milestone celebrations were postponed during the pandemic and are now competing with currently planned celebrations for limited space availabilities.

New Demand Patterns

This unprecedented demand, however, is causing a shift in how hoteliers need to operate and meet the new demand patterns. For example, the Southeast was a popular winter destination, but it now is seeing year-round bookings.

With that comes the challenge of labor. How do resorts deal with the extraordinary demand during a difficult labor market? By reimagining the guest experience, optimizing the use of technology, eliminating obsolete brand standards and reopening services.  

On a positive note, resorts have been able to increase pricing with very little pushback from guests while working with a leaner operating model.

The question then becomes, are these higher rates and profit margins sustainable? The short answer is yes.

  • New supply in domestic resort markets has been historically low, allowing existing hotels to capitalize on a new group of travelers that has rediscovered them and continues to discover domestic resorts.  
  • With U.S. savings at an all-time high, we expect the 2022 summer and festive seasons to achieve record performances and resort rates to remain elevated through 2023.
  • Regardless of the cyclical adjustment that may occur as destinations around the worldwide resort community open, we are left with a higher-water mark of resort/leisure travel rates (and performance) here at home.
  • Hotels that deliver a memorable guest experience most likely will have won new loyal guests.

Andrea Grigg is head of global hotel asset management, JLL Hotels & Hospitality Group.