What Can Wedding Bells Tell Us About Hotels After The Pandemic?

Love conquers all… and may also help speed the recovery of the hotel business in the post pandemic environment.

Hotels, along with other parts of the travel business, were among the real estate sectors most severely impacted by the shutdowns due to social distancing requirements during the pandemic. Many parts of both leisure and business travel may be slow to recover, but there is one area that is practically bursting to get back to business: weddings, and wedding receptions.

Nearly half of all couples that had planned a wedding in 2020 either postponed the entire wedding until 2021 or later, or had a small ceremony but put off the reception to a later date, according to a recent survey by The Knot. In addition, as many as one-third of couples that did hold a wedding had a smaller reception and plan to hold a second, larger ceremony — perhaps a first anniversary celebration? — in the months ahead.

Wedding parties can drive a lot of business to hotels and resorts, including booking ballroom or outdoor event space, having food and beverage offered throughout the celebration, which often takes place over a couple of days, and of course the room reservations for the wedding party and guests. Wedding parties themselves are not a main driver of hotel earnings, but are a reasonable proxy for the return of other normal travel activities. Indeed, it’s not just weddings that are a source of post pandemic pent-up demand for events and travel that can spur a rebound in the hotel sector. Many other gatherings that were postponed during the pandemic may be rescheduled in the months ahead, from family get-togethers and college reunions, to visits with the grandchildren.

The hotel business, to be sure, still has a long way to go to recover from the pandemic. Total spending on travelers’ accommodations declined 70.8% in the second quarter of 2020, to an annualized $80.5 billion, from a $275.4 billion annual rate one year earlier, according to the U.S. Census Bureau. The start of the reopening of the economy allowed a partial rebound to $157.9 billion (annualized) in the fourth quarter of 2020, but this is still 43.5% below its 2019 pre-pandemic peak.

Business travel is likely to recover more slowly than leisure travel. Business transient travelers are high-margin customers, especially in major cities, and many hotels rely heavily on business travel. A survey by the Global Business Travel Association reports that total business travel expenditures in 2020 were 60% below the prior year — and spending during the pandemic months of April through December were down nearly 80% from 2019. Executives anticipate a modest rise in 2021, with business travel spending expected to increase 21%, mostly in the second half of the year as vaccines ease concerns about infection.

The shift to online business meetings, conferences, trade shows and conventions will remain a challenge to the recovery of business travel. The continuing rollout of vaccines against COVID-19 will allow some travel to resume in the months ahead, and most hotels have implemented careful cleaning procedures and touchless check-in to reassure travelers about safety. Some of the changes in business travel that took place during the pandemic may linger longer after infection rates subside, however, as firms have found that online meetings and conferences can save both time and money. A survey of business travelers by the American Hotel & Lodging Association (AHLA) found that just 29% anticipate attending a business conference in the first half of 2021, while an additional 36% plan to resume attending conferences in the second half of the year, with the remainder expecting in-person conference attendance to wait until next year or later, if they return to in-person conferences at all.

This divergence between the recovery of leisure travel and business travel is clear in the occupancy rates during different days of the week. Prior to the pandemic, overall hotel occupancy rates were comparable for mid-week stays, which include a large portion of business travelers, and on weekends, which are predominantly leisure travel. Occupancy rates for all days of the week fell sharply in March and April of 2020, but travel by essential workers kept mid-week travel, as measured by occupancy rates on Wednesdays, a bit higher than on Saturdays, according to data from AHLA. As the economy began to reopen, however, weekend occupancy rates rebounded much more rapidly than mid-week, indicating that leisure travel is recovering faster while business travelers are slower to get back on the road.

Financial markets are also seeing a brighter future for the hotel and travel business than they had feared during the initial months of the pandemic. One measure of this shift in sentiment is the stock market returns of Lodging/resort REITs since the announcement of positive test results for vaccines against COVID-19 early last November. Total returns (capital gains plus dividends) from November 2020 through the end of March 2021 have been an eye-popping 81.4% for Lodging/resort REITs. For comparison, the S&P 500 has delivered a total return of 22.3% over this period, and the FTSE Nareit All Equity REITs Index a return of 21.2%. (Full disclosure, I am senior economist at Nareit, the trade association representing REITs and public real estate.) Lodging/resort REITs have fully recovered their losses from the early months of the pandemic, and the improvements in the fundamentals for leisure and business travel are encouraging for future gains as the economy — and the wedding business — gets back to normal.

This post first appeared on Forbes.com. To see the original, click here.