Hotel revenue still up, but shows signs of softening
Boost expected when per diem rates increase Oct. 1
Virginia’s hotel industry revenues remain above pre-pandemic levels but are beginning to show a softening.
That’s according to a report from Old Dominion University’s Dragas Center for Economic Analysis and Policy released Tuesday. According to the center’s analysis of data from STR, a division of CoStar Group that provides market data on the U.S. hospitality industry, hotel revenues in the commonwealth this year through August were 11.5% higher than the same period during 2019. That’s a change from the 12.3% reported from January through July 2023.
Hotel rooms sold were about 2.1% lower than compared with the same period in 2019. The average daily rate (ADR) for hotel rooms was $130, a 13.9% increase from 2019. Revenue per available room (RevPAR) was $82, up 10% from the same period in 2019.
Northern Virginia accounted for 43% of hotel revenue generated in the state in 2019; it remains 3.4% lower through August 2023 when compared to the same period of 2019. The state’s two other largest markets, Hampton Roads and Richmond, have “more than fully recovered,” ODU said in its report.
Rooms sold through August decreased 11.1% in Northern Virginia, by 10% in the Roanoke market and by 5.8% in the Virginia portion of the Bristol/Kingsport, Tennessee, market, compared with pre-pandemic data.
Eric Terry, president of the Virginia Restaurant, Lodging and Travel Association, told Virginia Business that leisure travel is seeing a softening and that the state is still not seeing a recovery in “corporate, transient business and even some of the government travel that we’d like to see.” Terry attributes that drop in leisure travel to a tightening of wallets rather than to the end of summer and back-to-school.
But, he added that a “bright spot” is on the horizon. On Oct. 1, the federal government will increase its standard per diem rates to $107 for most of the U.S., which “should actually give us a nice boost in the future,” he added. Virginia, because of its proximity to the federal government and military traffic, is one state most likely impacted by that increase, Terry said.
In Hampton Roads, Virginia Beach saw the largest revenue increase at 28% through August compared to 2019. That was followed by Norfolk/Portsmouth and Chesapeake/Suffolk at 26.3% and 25.8%, respectively. Williamsburg had the slowest revenue growth at 8.4%.
When comparing year-to-date data from 2023 to the same time period of 2022, data also show improvement, but a softening. According to ODU’s report, hotel revenues increased 10.5% across the state and rooms sold increased by 3.1% in August, down from July 2023 over July 2022, when revenues were 12.1% across the state and rooms sold saw a 3.8% increase. Northern Virginia saw a 21.86% increase in hotel revenue in August 2023 over the same period of 2022; rooms sold increased by 8%. Bristol, Virginia, saw the second largest revenue increase for that period at 9.4%, and rooms sold were at 1.1%.