As the commercial real estate (CRE) sector adapts to post-pandemic changes, one of the most notable trends in the hospitality space is the rising performance of non-CBD (Central Business District) hotels. With shifts in how people travel, work, and engage with technology, demand patterns are favoring non-CBD properties for their affordability, convenience, and adaptability.
Why Non-CBD Hotels Are Leading in Occupancy and Daily Rates
While CBD hotels were once favored for their prime locations, technological advancements and shifting consumer preferences are giving non-CBD hotels an edge. Historically, CBD hotels could charge a premium due to their proximity to offices, events, and attractions. In 2008, for instance, the average daily rate (ADR) for CBD hotels commanded a 62% premium over their non-CBD counterparts. By 2019, that premium dropped to 46%, and it has continued to narrow, showing only a 42% premium year-to-date.
What’s driving this shift? The answer lies in the intersection of technology and evolving consumer behavior:
- Technology as an Enabler: Ride-sharing services like Uber and Lyft have transformed the guest experience, enabling travelers to stay further from central locations without sacrificing convenience. As a result, guests are increasingly willing to trade proximity for cost savings, making non-CBD hotels an attractive option.
- Increased Alternative Lodging Options: The proliferation of options like short-term rentals, glamping, and vacation clubs gives travelers even more ways to explore beyond traditional CBD hotel stays. While these options have pressured both CBD and non-CBD hotels alike, non-CBD hotels remain more competitive on price without sacrificing amenities.
- Lower Fees and Charges: Non-CBD hotels often avoid resort and destination fees, which have tripled in cost over the past decade and are now charged by 12.5% of hotels (up from just 4.3% in 2015). Fewer fees make non-CBD hotels an even more appealing choice for budget-conscious travelers who appreciate transparency and predictability in pricing.
Changing Spending Patterns in the Hotel Industry
Technology has also disrupted traditional hotel spending. Food and beverage (F&B) revenue, which once accounted for over a third of room revenue at full-service hotels, has declined. In 2003, F&B sales peaked at 38.2% of total room revenue, but by 2019, the rise of food delivery apps like DoorDash and Uber Eats had cut this share to 31.5%. For CBD hotels, which historically enjoyed a captive audience, this trend has been particularly impactful.
With so many dining options just a click away, guests are less likely to dine in-house unless the experience is exceptionally curated. This shift challenges hotels to reimagine their F&B offerings and enhance the overall guest experience, ensuring the on-site amenities are truly worth the stay.
Emerging Revenue Opportunities in Non-CBD Locations
The challenge facing the hospitality sector now is to rethink revenue streams, particularly in non-CBD areas where there is ample opportunity to tap into new, tech-driven sources of profit. Hotels, especially in non-CBD areas, are embracing distributed technologies that expand their reach. Here are some of the ways they’re doing so:
- Day Passes and Remote Work Accommodations: Hotels can generate incremental revenue by offering loyalty members and local residents access to amenities like meeting spaces, pools, and lounges. For the growing remote workforce, day passes and flexible workspace options make these hotels an attractive choice for work and leisure, driving revenue from both local and traveling clientele.
- Loyalty Program Integration: To recapture market share from online travel agencies, hotels are focusing on direct bookings through loyalty programs. These programs not only build brand loyalty but also allow hotels to offer exclusive experiences and amenities, enhancing the guest experience while fostering repeat business.
The Future of Non-CBD Hospitality
As these trends continue to evolve, hotels must shift from a purely location-based strategy to a “total experience” approach. The current market environment suggests that travelers are prioritizing value, convenience, and flexibility over mere proximity to city centers. Hotels embracing distributed technologies, flexible spaces, and seamless mobile integration are better positioned to capitalize on this shift.
With more CRE investors taking note, the strategic focus for hospitality assets is clear: adapt to meet modern traveler demands or risk falling behind. Platforms like VidTech are at the forefront of helping CRE professionals assess, visualize, and strategize around these emerging opportunities. By providing high-quality video solutions that showcase CRE assets in their best light, VidTech supports owners and operators in attracting and engaging guests who value flexibility and unique experiences over traditional location perks.