Limited new supply and strong demand from leisure and corporate travelers could mean even higher prices in 2024

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Jan Freitag

After a year of arm-wrestling leisure travelers for guest rooms, CoStar National Director for Hospitality Market Analytics Jan Freitag warns meeting professionals to prepare for more of the same in 2024 due to three converging forces will make availability this year a contest where the spoils go to the one who acts the fastest.

As a longtime data analyst and industry watcher, Freitag did offer a glimmer of hope for those who have the courage to book early and not all destinations are as impacted as New York City.

Supply Side Stagnation Meets Demand Rebound

First, let’s look at the current pipeline of meeting space. Growth in the United States in hotel inventory is 0.8% in 2023 and the long-term average of new guest rooms each year is 2%. “We’re not building a whole lot of new right now,” Freitag said. “Construction is flat at 150,000 rooms and most of those are limited service with no ballrooms and no food delivery, so you don’t have a lot of new options.”

Number two, the number of group rooms booked in the United States in October was actually higher than it was in October of 2019, indicating that demand is back to 2019 pre-pandemic levels and he doesn’t see that changing.


The third trend that will influence room availability is that we are not all back in the office. The standard return-to-office hybrid model taking shape means that business travelers are cramming a five-day travel week into a three-day travel week, further compressing availability on the days groups would normally be in-house.

That partially remote dynamic is feeding into the blended or bleisure demand and becoming the new reality. This interconnectedness of work life and personal life requires that guest rooms support whatever a person is doing in that room at that moment: watching ESPN, being on a zoom call with  a neutral background, plugging in all the devices. “The room has to accommodate all of those things,” he said.

The outcome of all of this will likely mean higher room rates. “I’m here to tell you that if you want the availability on peak nights, you will have to book further out or pay the price,” Freitag warned.

A No-Impact Recession for Travel?

Freitag predicted that if a general macro-economic recession hits in 2024, it may not impact the travel industry. “We are fortunate that the American leisure traveler is very resilient, particularly the upper end of the market—they’re doing just fine,” he said.

“If you want the availability on peak nights, you will have to book further out or pay the price.”

The universe of people at the bottom income bracket may be planning to travel less, but every other income level is saying, “Yeah, we’re expecting to travel more in the next six months.” So even if the country experiences 0% growth in the overall GDP, it looks like hospitality may continue to be strong.

Read MoreExperts: Travel Industry Could Coast Through Recession

“We’re going to continue to see healthy to strong group demand. And we don’t see any sign of that changing despite macro-economic softening,” Freitag concluded.

Results May Vary


On a high level, the tightening Freitag described is happening everywhere, but some markets are doing better than others. Year-over-year, the markets that have done really well are Washington, D.C., and Boston, which are coming back with government and biotech travel rebounding.

New York City has done well for some very specific local reasons. One is just pure demand from the three-legged stool of leisure, corporate and groups coming back to the office. In the meantime, the city took 16,000 rooms offline to house immigrants and refugees. On top of that, new Airbnb legislation makes that business hard to pencil and a lot of those overnight units now have a minimum of a 30-night stay.

“We are fortunate that the American leisure traveler is very resilient, particularly the upper end of the market—they’re doing just fine.”

Plus, it’s really hard to build anything in New York City because any new hotel has go through a prolonged process of approvals, which likely means that it will be required to be a unionized hotel, which likely means it will be more expensive to run, which likely means that no more mid-block limited-service hotels will be built there. “New York City is going to be a super interesting market to watch because of supply constraints and demand acceleration. You will have to book early and book often because once the 8,000 guest rooms in construction now open, I’m not sure there’s going to be a whole lot of new hotels coming,” he said.


On the other side of the country, San Francisco has become the poster child of remote work, inventing the tools for the rest of the country to stay home. In the meantime, the hospitality industry has been busy shining all those big buildings. Moscone Center is renovated, expanded and ready for business. Hotel owners have spent time renovating and it is a beautiful city. Asia-Pacific Economic Cooperation (APEC) conference brought 20,000 people to town in November, including President Joe Biden and China’s President Xi Jinping. Dreamforce was back this year as a 40,000-person citywide. “But the city has suffered some PR problems and it’s the individual CEO perspective that will have to change to allow meeting professionals to bring events back,” Freitag observed after a personal fact-finding mission to the city.

Back in the secondary cities, developers have discovered that it is easier to build in these markets and many have popular outdoor options. A lot of this demand was driven by the leisure traveler and now that everyone is in the office more often, the question is whether there is sustained business and group demand for the secondary markets, even if it is for regional meetings.

“Cities with good lift will do the best,” Freitag predicted.

AI All the Time

“This is early, early days for AI. We haven’t seen anything yet,” Freitag said. The possibilities for hospitality are beyond current imagination in his opinion. “I think every hotel company and every online travel agency is trying to figure out right now how they can solve the first-, second- and third-line of questions about upgrades and spa hours and the like using a chatbot.” The next generation will be proposing what to do, where to go and what to eat based on interactions tailored for leisure, group and corporate travelers. “We’re not there yet at all. That is one of the hardest problems to solve,” he said.

Once AI gets proficient at quickly answering those basic questions, Freitag envisions a world where employees can have longer conversations with guests and be more engaged. They can walk guests to where they want to go instead of handing them a map. “They will probably always be better at recommending out-of-the-way local spots for tacos that aren’t on any website,” he said.

“My 2024 prediction for AI is that it will change dramatically. We went from zero to 60 in one year, we’re now at cruising speed, imagine where we could go from there,” he offered.

This article appears in the January 2024 issue. You can subscribe to the magazine here.