Denver Tourism Surges, But Slower Convention Traffic Holds Hotels Back
Visitors to Denver more than doubled in 2022 compared to 2019, but convention activity remains depressed, keeping hotels from reaching pre-pandemic occupancy.
In 2022, Denver welcomed more than 36.3 million overnight visitors, according to data from Visit Denver, a 105% increase over 2019 when just 17.7 million overnight visitors came to Denver. Tourism officials anticipate this trend will continue to grow in 2023 as visits to Denver International Airport continue to increase and the city hosts events like Psychedelic Science 2023, the world’s largest psychedelic convention, which brought about 12,000 people to town, according to the conference’s sponsors.
Luxury hoteliers like CoralTree Hospitality Chief Commercial Officer Andre Fournier told Bisnow that convention business has been one of the primary drivers of demand for high-end properties in Denver. But that demand is starting to shift to so-called bleisure travel, or business trips that include leisure activities.
For example, Fournier pointed to Denver’s inconsistent convention traffic as one reason why the occupancy at the company’s Magnolia Hotel downtown hasn’t fully recovered to its pre-pandemic levels. In 2022, Denver welcomed more than 540,000 people to 130 local conventions, according to data from Visit Denver. However, that total is still 32% below the number of people that attended conventions in Denver in 2019, the data shows.
“A lot of travelers are still comparing this year to the omicron effect in 2022,” Fournier told Bisnow in an interview. “We’re still feeling that vibe.”
Denver convention traffic is expected to increase in 2023 because of large conferences such as the Association for Computing Machinery’s annual conference, which Visit Denver expects to bring 12,000 people to town, and the Great American Beer Festival, which drew 40,000 people to Denver in 2022, according to the event’s website. But it remains to be seen whether this traffic will meaningfully increase the city’s convention attendance.
Fournier said business travelers are also now more likely to want some kind of leisure activity with their stay, which has helped boost occupancy at the company’s hotels in Golden and Colorado Springs.
One positive trend that Fournier sees is that suburban hotels are starting to see their occupancy rates increase as more companies begin requiring employees to return to the office for at least three days per week. Eventually, Fournier said this demand could bleed into the downtown markets, although that remains to be seen.
Denver’s event activity combined with improving economic conditions have also caused industry experts at CBRE to raise their market projections for the year. Last summer, CBRE released a forecast that suggested Denver’s hotel market would see occupancy rates around 68.7% and revenue per available room of around $95.77. For comparison, Denver hotels had a greater than 73% occupancy rate and had a more than $100 RevPAR in 2019 before the pandemic began, CBRE data shows.
As of Q1 2023, CBRE is projecting that Denver hotels will have an average occupancy rate of 72.2% and a RevPAR of more than $105 by year’s end. In 2024, CBRE estimates that occupancy rates will increase to more than 73% and RevPAR will increase to $111, according to data shared with Bisnow.
“Denver has actually recovered quite well from the pandemic,” CBRE Vice President of Valuation & Advisory Services Zachary Alm said. “If you look at the performance of the Denver airport, you’ll see that the market and the Central Business District have done very well, which I think is a sign that the hotel market is returning to normal.”
One reason why Alm feels optimistic about the future of Denver’s hotel market is that economic conditions are improving, which has helped inspire consumers to travel more. Nationwide, inflation fell to around 4% in May, which is a considerable drop from the 9.1% inflation rate recorded in June 2022, according to data from the Federal Reserve Bank of Kansas City. In Denver, inflation was about 1% higher than the national average, despite declines in food and energy price inflation, the data shows.
At the same time, the S&P 500 has gained about 13% over the last six months, which has further increased consumer confidence, Alm added. Consumers have also been drawn to the “upper tier” assets like new hotels with luxury accommodations, a behavior shift that has helped drive the market’s overall recovery, Alm said.
Hoteliers like Matt Joblon, CEO of BMC Investments, which owns a stake in The Clayton and Halcyon hotels in Cherry Creek, add that this consumer confidence is driven in part by the pent-up demand for travel that was caused by the pandemic. In turn, Joblon said hotel customers are demanding new experiences like eating at local restaurants more than material items like branded bathrobes.
Cherry Creek’s strong office market has also helped attract more hotel customers to the area instead of to comparable properties in other markets, Joblon added. JLL’s Q1 2023 office report highlights Cherry Creek as one of the best-performing office submarkets in Denver because of a 7.5% vacancy rate, which is one of the lowest among Denver’s submarkets and has decreased 34% since 2020, according to the report.
For the business travelers who want leisure activities, Joblon said there are several health and wellness stores, multiple healthy restaurants and private trainers in Cherry Creek. Hotels in Cherry Creek also have a lot of meeting space because they often serve business clientele during the week, Joblon added.
Despite the increase in business trips to Denver, business travelers aren't spending as much as they have in previous years, which has hoteliers like Tiffany Owen, the general manager of The Rally Hotel in the Central Business District, thinking of new ways to attract their business.
In 2022, business travelers spent approximately $152 per day, a more than 15% decline year-over-year, according to Visit Denver. This decline in spending coupled with consumer demand for local experiences were two of the driving factors behind The Rally’s decision to offer deals with local recreation companies like the Colorado Adventure Center, according to The Rally’s website.
Hoteliers in markets outside of Denver’s city limits like Curtis Bova, the general manager of The Inverness Denver in Englewood, are leaning into the bleisure trend. Bova said The Inverness has a resort feel because it has a spa on-site and is close to a golf course. The property is also located near a light-rail stop, which gives travelers easy access to downtown, and is in the middle of a business park. Bova said these factors are just a couple of reasons why he’s seen more business people taking meetings in the hotel lobby before heading out to play 18 holes with their buddies.
“Leisure travel absolutely exploded during the pandemic as people were looking for any reason to get out of the house,” Bova told Bisnow in an interview. “A lot of times that played out with travelers trying to find new local experiences, and that’s something we’re still benefiting from.”
Even though Denver’s hotel market is facing several tailwinds, hoteliers still point to a few speed bumps in the market’s recovery. One big issue that most hoteliers are dealing with is staffing. Some hoteliers like Bova and Owen said they have worked to improve their talent pipeline by forging new partnerships with hospitality companies and improving their benefits packages for employees. For instance, Owen said The Rally has been experimenting with four-day workweeks for its employees. The Inverness, on the other hand, hired an internal recruiter to help streamline its staffing process.
Another couple of issues that hoteliers will continue to face in the future are the continued renovations to Denver’s airport and convention center, both of which could influence the number of customers that book hotel stays. Denver is currently working to expand the convention center by about 200K SF, including an 80K SF ballroom and a 35K SF pre-function space, according to the Department of Transportation and Infrastructure. The project is about 80% complete and is expected to be finished by the end of 2023.
Meanwhile, the number of travelers coming through DIA has started to wane. In April, the airport welcomed nearly 6 million passengers, a nearly 9% increase year-over-year, according to DIA data. However, that 6 million passenger figure is a decrease of nearly 7% when compared to March 2023, despite April being a traditionally more popular month for travel.
“As much as things feel more normalized, the Tetris puzzle we’re playing with is more complicated than ever,” Bova said.
