Luxury hotels were able to increase average daily rate in regional locations, as demand for coast and country grew, according to STR.
The data was revealed as a study from Small Luxury Hotels of the World reported on pent-up demand from affluent travellers.
Coastal occupancy was on average 35 percentage points higher than main city occupancy across six European countries for the week ending 25 July 2020. Even Italy, once the epicentre of Covid-19 in Europe, reported 53% occupancy in the Basilicata/Calabria/Puglia market.
Aoife Roche, STR director of account management, said: “Segmentation remains a key consideration: Leisure travellers are a primary demand driver at this point in the pandemic, and beaches are traditionally popular holiday destinations.
“Beyond segmentation mix, new Covid-related hygiene guidelines are also influential. Physical distancing requirements may shift demand from crowded urban areas into sprawling, bucolic destinations. Markets centered around lower-risk outdoor activities – aka beaches – may have better luck attracting travellers looking to vacation safely.”
Roche said that moving away from coasts and into the countryside yielded another pandemic performance pattern, this one related to hotel class. Luxury and upper upscale class hotels had, she said, “struggled mightily” over the past several months, largely due to their reliance on group and business demand. As these sources dried up, performance suffered and many hotels temporarily closed.
However, travellers moving out of cities and into secondary and tertiary markets have breathed new life into higher-end hotels. Luxury and upper upscale class properties in provincial markets across nine countries filled more than 50% of rooms for the week ending 25 July. Such high demand was, she said, impressive on its own, but next to comparable hotel performance in city centres, a clear preference for regional destinations appeared. Main city occupancy in five of nine countries fell short of 20% during the fourth week in July.
Across provincial markets, luxury and upper upscale occupancy exceeded average market occupancy in six of nine countries, suggesting a preference for upper-tier hotels over mid-tier or budget properties.
Roche said that healthy demand for luxury and upper upscale hotels allowed for pricing power, and provincial markets in five of nine countries increased average daily rate year over year, “a welcome shock in the middle of the worst hotel downturn in history".
Among main cities, Vienna fared the best, breaking even with flat percentage comparison from the same week in 2019.
Roche said that segmentation shift could be the reason for provincial markets’ noticeable ADR growth. Exchanging pre-negotiated group rates for higher transient rates with their shorter booking window could increase ADR in hotels heavily reliant on group demand. However, this phenomenon is more likely to occur in primary markets, not secondary and tertiary provincial markets.
Roche concluded: “From the coast and into the countryside, regional markets are proving the most resilient as we enter the very early stages of Covid-19 recovery.”
The results were supported by a study from Small Luxury Hotels of the World and Liz Hall Hotel & Travel Consulting, which found that 38% of affluent clients in North America were ready to fly internationally, and more than 90% of respondents would seek out a small hotel or private residence while on the road.
Of the 74% respondents willing to fly, 93% agree that additional health checks at airports will help ensure the safety of travellers.
“Our members have always shown great resilience and an enduring appetite for travel, so it’s encouraging to see that they are travel ready, looking at options both close to home and abroad for 2020,” said Richard Hyde, managing director of SLH. “Our small hotels are able to offer so many solutions, from their location in low-key destinations and neighbourhoods, to their versatility to become essentially a private residence.”
Insight: Hall told us that flexibility and cleanliness paramount were priorities for guests as the ability to travel remained subject to change and that remains true for all segments of travel. It is, nonetheless, a comfort for many of the operators to see that luxury is returning - in the right location and in intimate surrounds.
Will this luxury leisure demand bleed into autumn, as many hope? It seems likely as the hugely rich tend to be that bit more flexible than the average consumer group.
The days of the large hotel are not over, but they are over for now. Whether hotels can slice and dice these large properties into separate units, into office space or something more akin to residential will determine how long they can continue until business travel picks up and wider luxury demand comes back.