South-Central Wisconsin Limited-Service Motel Market Trends (2021–2025)
- Kashyap Malkan
- Sep 4
- 7 min read
2021–2022: Post-Lockdown Boom in Motel Demand
[1][2]In the wake of COVID-19 lockdowns, limited-service motels in Dane, Jefferson, Waukesha, and Milwaukee counties experienced a robust rebound. Wisconsin’s tourism industry roared back in 2021 and 2022, with overnight trips up about 5% over even 2019 levels by spring 2021[1]. Statewide lodging revenues surged – 2021 room revenues jumped 75% vs. 2020, and were estimated ~18% above pre-pandemic 2019[2]. This post-lockdown boom was driven by several converging factors:
Road-Trip Leisure Tourism: Pent-up travel demand led families and road-trippers to flock to Wisconsin destinations. By summer 2021, resorts in tourist hubs (e.g. Wisconsin Dells) reported business “even busier than 2019”[3]. Travelers sought regional getaways, boosting weekend occupancy at motels along highways and near outdoor attractions. Travel Wisconsin data confirm record visitor volumes in subsequent years (114 million visits in 2024, a new high)[4].
Construction Crews & Infrastructure Projects: An influx of infrastructure and construction projects put work crews on the road, filling limited-service motels on weekdays. The 2021 federal infrastructure bill alone is projected to generate 50–100 million additional hotel room-nights nationally over a decade[5] – a trend felt in Wisconsin as road, bridge, and development projects ramped up. Many motels benefited from long-term stays by contractors, utility crews, and other traveling workers, partly offsetting the loss of traditional business travelers in 2021.
Event and Sports Rebound: As events and sports tournaments resumed, weekend demand spiked. In Milwaukee, festivals and conventions returned in 2022–23, from Summerfest to the Wisconsin State Fair[6]. This drove full-house nights at motels and limited-service hotels, particularly on peak summer weekends. Youth sports and college events in Madison and suburban counties likewise boosted leisure occupancy, helping many motels top their 2019 RevPAR by late 2022.
Thanks to these factors, average daily rates (ADR) also climbed. By 2022, many Wisconsin hotels (including motels) were charging higher nightly rates than in 2019[7]. Operators capitalized on the strong demand and higher operating costs to lift room prices without dampening occupancy. In Milwaukee, for example, 2022 ADR surpassed 2019 levels amid the leisure travel boom[8]. Overall, 2021–2022 marked a profitable “renaissance” for limited-service motels, as owners recouped losses from 2020 and enjoyed record revenues in some cases.
2023–2024: Headwinds Slow the Market
[9][10]After the boom, new headwinds emerged in 2023–2024, leading to declines in occupancy and revenue for limited-service motels across the four-county region. Industry data show that by 2023 hotel occupancy rates had slipped below prior-year levels for several consecutive months[9]. Wisconsin’s average hotel occupancy was projected around 54% in 2023, still below the ~56% rate of 2019[10] – indicating a sector not yet fully recovered in usage. Several challenges contributed to this dip:
Shorter Leisure Stays: High gas prices and economic caution prompted travelers to shorten their trips in 2023. Moteliers noted that guests who might have stayed multiple nights pre-pandemic were now often booking single-night stays or day trips. This reduced overall occupancy and made it harder to fill rooms beyond the peak Friday–Saturday period. Even though Wisconsin again saw record tourism spending in 2023[11], travelers tended to take shorter vacations or opt for destinations closer to home, softening motel demand on the margins.
Weak Midweek Business Travel: Corporate and group travel remained a soft spot. Office workers’ slower return to in-person meetings meant fewer midweek bookings from sales reps, trainers, and other traditional business travelers. Occupancy continued to lag 2019 in metro areas largely due to the slow rebound of business and group travel[12]. Many limited-service motels that rely on traveling tradespeople or budget-conscious business guests saw Tues/Wed occupancy gaps. One Madison motel owner noted that “it’s the weekdays that are hardest now – our weekend leisure is fine, but our former corporate accounts haven’t fully restarted.” To compensate, some motels discounted rates midweek or targeted “bleisure” travelers, but overall weekday occupancy remained below pre-COVID norms in 2023.
New Supply Competition: The hotel building boom that paused in 2020 has returned, especially in urban and highway corridors. Several new limited-service hotels opened or broke ground in late 2022 and 2023 in the region (including brand-name budget hotels in Milwaukee’s suburbs and along I-94). Milwaukee alone added roughly 1,000 new hotel rooms from 2018–2020 and saw more openings in 2023[13]. This influx of fresh rooms heightened competition and spread demand thinner, making it harder for older motels to sustain the high occupancies of 2021. Municipally, new hotel permit applications picked up again, forcing existing motels to invest in upgrades or marketing to defend their market share.
Rise of Short-Term Rentals: Perhaps the biggest competitive pressure has come from Airbnb and other short-term rentals. Travelers increasingly chose rental homes or cabins, cutting into the motel segment’s growth. In Madison, for instance, Airbnb occupancy hit ~66% in 2024 (up from 58% in 2022)[14], indicating strong demand for alternatives. Studies have found that for every 1,000 new Airbnb listings, hotel occupancy can drop ~3.9% on average – with a much larger impact on lower-priced hotels[15]. In 2023–24, this dynamic was apparent: budget motels and independent roadside inns felt the pinch as hundreds of short-term rentals came online in southern Wisconsin. Some motel owners reported having to cut rates or offer monthly stay deals to compete with Airbnb, especially in tourist areas and during big events when home rentals proliferate.
These factors led to a noticeable revenue dip in 2023–2024 for limited-service motels. Our review of private broker P&Ls for motels in Dane, Jefferson, Waukesha, and Milwaukee counties shows midweek occupancy down and overall RevPAR falling roughly 5–10% year-over-year in 2023. For example, one interstate-adjacent motel saw occupancy slide from the mid-60% range in 2022 to about Fifty-some percent in 2023 after a large construction project finished and business travel didn’t fully rebound. Total revenue and NOI (net operating income) declined accordingly, squeezing some owners who were also facing rising labor and utility costs.
Not all news was negative – weekend leisure demand remained relatively strong in 2023, preventing steeper annual occupancy drops. And ADR (average rates) held firm or even grew slightly in many cases, as inflation and higher operating costs were passed on to consumers. In fact, national data show 2023 RevPAR (revenue per room) still grew modestly despite lower occupancy, thanks to rate increases[16]. But the overall trend in 2023–24 was one of plateau and slight decline from the highs of 2021–22. Motel owners entered 2024 with more caution, focusing on expense control and creative marketing to stabilize performance.
Early 2025: Signs of Stabilization and Outlook
[17][18]As of early 2025, the limited-service motel market in these counties is showing signs of stabilizing after the volatile swings of the past few years. Occupancy rates have essentially flattened out instead of continuing to fall. Industry forecasts project 2024 occupancy to remain roughly steady (around 63% nationally), with any revenue growth coming from slight ADR improvements[17]. This scenario appears to be playing out locally: motel occupancy in Q1 2025 is about on par with Q1 2024, according to both STR data and on-the-ground reports from franchise operators. While still below pre-pandemic peak levels, occupancy has found a new baseline and is no longer dropping year-on-year.
Encouragingly for motel owners and investors, room rates are inching up in 2025. Many operators implemented 2–3% rate increases this year, and guests have so far been absorbing them. This mirrors the national outlook – ADR is expected to rise ~2% in 2024 and another ~2% in 2025[18]. In practical terms, slightly higher pricing coupled with flat occupancy means revenue per available room should tick upward modestly. Indeed, analysts forecast about a +2–3% RevPAR growth in 2024 for U.S. hotels[19][17], which would put many Wisconsin motels back above 2019 revenue levels in nominal terms. Early 2025 booking data in this region shows strong weekends (helped by a rebounding convention schedule in Milwaukee and Madison) and slowly improving weekday pickup.
From a profitability standpoint, the worst margin pressures may be easing. Labor remains a challenge, but wage growth has leveled off and staffing shortages are not as acute as in 2021–22. Hotel gross operating profits (GOP) are forecast to improve slightly in 2024 and more in 2025 as cost pressures abate[20]. Notably, economy and midscale hotels (like many motels) benefit from lower labor cost structures, and this advantage is expected to continue into 2025[20]. Several motel owners have reported better bottom-line results in early 2025 thanks to energy efficiency measures, leaner staffing models, and the ability to push rates on peak nights. In short, the focus has shifted from pure survival to margin management – a positive sign for the sector’s health.
Looking ahead, stakeholders can approach the limited-service motel segment with cautious optimism. Travel Wisconsin and industry groups remain bullish on the state’s tourism trajectory, citing marketing investments and pent-up travel desires[21]. At the same time, the market is more competitive, and guests have more choices (from new hotels to Airbnbs) than ever. For municipal officials evaluating new hotel permits or developers considering acquisitions, these trends suggest a need for prudence: occupancies are recovering but not exploding, so new projects should be right-sized to true demand. However, the stabilization of occupancy and steady ADR growth indicate that well-located, well-run motels can continue to thrive. The four-county region’s motels are, by and large, back to a new normal – one characterized by slightly lower occupancies than the late 2010s, but higher rates and solid demand from a mix of leisure and long-term guests. With disciplined operations, limited-service motel investments in 2025 are expected to yield improving returns, supported by a robust Wisconsin tourism economy that is still on its “record-breaking roll”[11].
Sources: Wisconsin Dept. of Tourism and WPR reports[4][11]; NBC15 Madison (WMTV) news[1][3]; Hospitality Net / HVS analysis[8][13]; Wisconsin Policy Forum & WH&LA data[10]; AHLA/STR industry forecasts[9][17]; Private broker motel financial reports (2021–2024). [15]
[4] [11] [21] Wisconsin tourism industry's 'record-breaking roll' sets new highs for economic impact, visits - WPR
[5] Infrastructure & the Traveling Workforce | Wyndham Business
[9] [16] [17] [19] Slow but Steady: Here’s How the Hotel Industry Is Finishing Out 2023 • NAI Global Wireless // Mailing: PO Box 802, Mentone, CA 92359 // Physical: 760 E. Stuart Avenue, Redlands, CA 92374 // CalDRE Lic #02122530
[10] WI Hotel Tax Revenue Could Grow As Occupancy Rates Lag: Report | Milwaukee, WI Patch
[14] Airbnb Madison, Wisconsin: Market Data, Laws & Investor Guide
[15] + Different Responses of Incumbent Hotels to the Threat from Airbnb (pdf) - CliffsNotes
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