While hopes were high that the drop in leisure travel might ease the pressure on hotel group pricing this year, don’t expect negotiations to get easier any time soon. According to a recent report, key indicators point to a continuation of the post-pandemic seller’s market through 2024.

Despite some hope that we’d see a turnaround in the seller’s market this year when it comes to group business at hotels, a recent report from the American Hotel & Lodging Association points to several signs that we won’t see a return to a buyer’s market this year.

Part of the reason why, according to AHLA’s 2024 State of the Hotel Industry, is because occupancy rates are still rising even as the post-pandemic “revenge travel” boom in the leisure market has begun to ease. Overall, average hotel occupancy is forecast to hit north of 63% this year, almost a percentage point higher than last year and inching up toward the almost 66% levels hotels enjoyed pre-pandemic. With occupancy improving throughout the U.S., even at just 0.5% year over year, competition for space, dates and rates is likely to continue to heat up.

“2023 was a significant comeback year for hoteliers, and our outlook for 2024 shows the industry is poised to build on that success,” said AHLA President and CEO Chip Rogers in a press statement. “The expectation of higher occupancy rates and record amounts of wages and tax revenue point to a strong future.”

The return of business travelers and group meetings and conventions business is a big part of that comeback story, according to the report. Business travel recovery accounting for 439 million room nights sold in 2023 — just 8.2% below 2019 levels, and group business also is humming along nicely.

“The top 25 U.S. markets recovered 99.1 percent of group business in the third quarter of 2023 compared to 2019,” the report noted. With 47% of meeting and event planners anticipating increased budgets this year — and another 40% reporting expectations their 2024 budgets would be flat — that growth trend is likely to continue, the report said. With group business expected to continue booming, it’s probable that available space for group business will be harder to come by than it was in the COVID era.

Room rates also are on the rise and may be tougher to negotiate this year than they were a few years ago. The average daily room rate at U.S. hotels was up more than 4%, to $155.47, last year, and is expected to reach $160.16 this year, bringing rates up almost 22% over 2019.

Not surprisingly, guest room revenue also is on the rise, with RevPAR — revenue per available room — expected to reach $101.82 this year. While that’s just a 4% increase over 2023, it’s more than 17% higher than it was in 2019. Even outside the guest room, hotels are reaping the benefits of increased guest spending on everything from transportation and food and beverage to retail, to the tune of a record $758.6 billion this year. This is almost 5% more than hotels earned in ancillary guest spend last year, and about 24% higher than in 2019.

But all is not rosy on the hotelier side. Rogers said. “Hoteliers face continued challenges, including a nationwide labor shortage, persistent inflation, high interest rates, and a federal regulatory agenda that’s making it harder for hoteliers to do business.”

In fact, wages for hotel employees are expected to reach record highs this year as hoteliers continue to try to lure workers back, according to AHLA. The good news for planners who have been having difficulties due to short-staffed properties is that hotels are projected to employ almost 45,000 more employees this year. The bad news is that U.S. hotels are still employing almost 225,000 fewer people than they did in 2019. And, while the pace of inflation has slowed, prices remain elevated for many hospitality-related products, including food and beverage, disposables such as paper and tissues, and guest room amenities.

But hotels will continue to acclimate to this new environment in 2024, the report said, “adopting sophisticated technology and strategies to make their operations more efficient and sustainable while enhancing guest experiences. In tandem with implementing new tools and strategies, the industry will continue to invest in bolstering the hospitality workforce, attracting new talent, and preparing teams for the future of travel.”

Read the full report here.