Market Recovery Monitor - 10 December 2022

Key takeaways:

• U.S. occupancy improved after a post-Thanksgiving lull
• New York City hotels turned in their highest occupancy since the end of 2019
• Weekday group demand reached an all-time week 50 high
• The Caribbean is showing uptick in performance
• Most global markets still in depression are those in China

After a lull post-Thanksgiving, the U.S. hotel industry kicked back into gear as occupancy rose to 59.6% for the week of 4-10 December 2022. That level was up from 55.4% in the prior week. Room demand (23.1 million) was a record high for week 50 and for the two-week period following Thanksgiving. Occupancy was the fourth highest seen a fortnight after the holiday behind 2017, 2019 and 2018. Given the record-breaking demand, supply growth was the reason occupancy was lower than in 2017. As we have seen countless times this year, nominal average daily rate (ADR) and revenue per available room (RevPAR) were the highest ever seen for the specific week. Nominal ADR increased 2% week over week (WOW) to US$145, which was 12.4% higher than a year ago and 15.3% greater than in 2019. Nominal RevPAR was up 9.8% WoW to US$86, 16.7% above last year’s level and 13.9% better than in the year before the pandemic. Real ADR was US$0.26 less than in 2019 with real RevPAR down by a little more than US$1 against 2019.

Fifty-one markets reported their highest demand for week 50 since the start of weekly reporting in 2000. The group included Austin, Dallas, Nashville, Orlando, and Phoenix. New York City led the nation in occupancy (90.2%) with Fort Myers (82.5%) a distant second. Miami, Orlando, Phoenix, and Tampa all saw occupancy above 70%. More than half (53%) of the 166 STR-defined U.S. markets posted an occupancy higher than in the same week of 2019. Overall, U.S. occupancy was 0.7 percentage points (ppt) lower than in the comparable week of 2019.

New York City sold more rooms than any other week since the end of 2019. This week’s occupancy was also NYC’s highest since the end of 2019. When considering every week of the past three years (2019-22), NYC’s occupancy week level was its 17th best. Weekday (92.6%), weekend (91.3%), and shoulder (85.5%) occupancy were all among the highest seen in New York since the start of the pandemic. It should be noted that since the start of the pandemic, most of New York City’s five highest occupancy levels for each day type have all occurred since the end of August.

Weekdays (Monday-Wednesday) accounted for most of the week’s room demand (44.3%), which was the highest percentage of the year. Total weekly room demand increased by 1.6 million room nights week over week, with weekdays accounting for 1.3 million of them. Shoulder (Sunday & Thursday) also saw solid growth (500,000 WoW) with weekends room nights falling by 171,000 WoW. Most of the week’s room demand growth came from the Top 25 Markets, which accounted for 52% of the week-on-week gain. Those markets were also responsible for 48% of weekday demand and most (52%) of the increase on shoulder days. They also saw less of a decrease in weekend room nights as nearly all of it (79%) came from other markets.

New York City also led the nation in weekday occupancy (92.6%) with Tampa and Phoenix above 80% along with Fort Myers and Palm Beach FL. San Francisco also saw solid weekday occupancy at 75%. This was the 17th time this year that weekday occupancy in San Francisco reached the mid-70s. In 2019, San Francisco was at or above that level 45 times. While the week’s occupancy was another sign of San Francisco’s recovery with business travelers, in 2019, weekday occupancy was above 95%.

The week’s strength was partially driven by group demand, which was the highest for week 50 and the fortnight after Thanksgiving. Weekday group demand was also the most for the week over the past 23 years and accounted for nearly half of the group rooms sold. Orlando benefitted the most from weekday group demand, which made up 45% of total demand Monday through Wednesday. Phoenix, New Orleans, and San Diego also saw solid contribution from group with nearly a third of total weekday demand coming from that segment.

While real ADR was flat to 2019 on a national basis, 47% of markets recorded real ADR that was higher than in the comparable week of 2019 including Maui, Miami, Nashville, New York City, Phoenix, San Diego, and Tampa. Maui had the nation’s highest nominal (US$457) and real ADR this week. Closely behind Maui was New York City (US$435).

Weekday nominal ADR in New York City topped US$457 as Midtown East, Village/Soho/Tribeca, and Midtown West/Times Square surged above US$500. All but three submarkets in New York had real weekday ADR above 2019. The notable exception was NYC’s Financial District, where nominal weekday ADR was US$455 but down 3% below the comparable week in 2019 when accounting for inflation. Twenty-four New York City hotels had nominal weekday ADR of more than US$1,000 as compared to 13 in 2019. Overall, the city accounted for 10.4% of the nation’s room revenues. This was the highest percentage of the past 109 weeks.

New York City also had the highest nominal RevPAR (US$392) of the week, which was 20% higher than in 2019 and 4% greater when accounting for inflation. Nearly every market (90%) had weekly RevPAR that was higher than in the same week of 2019. On an inflation-adjusted basis, 49% of markets had real RevPAR above 2019.

Over the past 28 days, 53% of U.S markets experienced real RevPAR above 2019 (Peak category) with another 44% in STR’s “recovery” category as real RevPAR was between 80% and 100% of the 2019 level. Fort Myers and Sarasota continued to report the highest real RevPAR above 2019 as recovery continues post-Hurricane Ian. Real RevPAR in both markets was 50% higher than what it was in 2019. For the first time in 36 weeks, a market, San Francisco, fell back into STR’s “Depression” category as real RevPAR over the past 28 days was below 50% of 2019’s level. Five of the Top 25 Markets, including Miami, Phoenix and San Diego are likely to finish the year with real RevPAR above 2019.

Around the Globe 

Outside of the U.S., occupancy came in flat week over week at 61.9%. This was 4.6ppts behind the comparable week in 2019. ADR decreased by a marginal 0.2% WoW to US$130, which was 25.0% ahead of 2019. Fifty-one of the countries tracked on a weekly basis saw a week-over-week drop in occupancy.  

Northern Europe again saw the highest occupancy of any subcontinent (79.0%), up 1.9ppts WoW and 3.2ppts ahead of 2019 levels. The U.K. saw the highest occupancy last week of any European market at 80.8%, supported by markets such as Leeds, Glasgow, and London. ADR for the country produced 2.3% growth week over week to US$162.  

The Caribbean is also seeing positive performance, with occupancy levels for last week at 65.8%, up 4.1ppts from the comparable week in 2019. At the other end, the Middle East saw a 6.3ppts WoW decrease due to declines in Egypt and the United Arab Emirates.   

Northeastern Asia had the lowest occupancy at 53.7%, which was flat compared to the previous week. China saw a slight occupancy recovery (1.1ppts) week over week. This was supported by robust performance in markets such as Nanjing, Hangzhou, and Hong Kong SAR.  

Over the past 28 days, 56% of non-U.S. markets reported RevPAR above 2019. Twenty four percent of non-U.S. markets were deemed in recovery with another 18% in “Recession” (real RevPAR 50% and 80% of 2019). Five markets remained in “Depression,” – all but one of those markets were in China.

Big Picture

Demand returned much stronger than was expected, particularly in New York City. We were surprised by the number of hotels with a US$1,000 ADR, as 24 of the 48 hotels at that level were in the market. This week is typically the last of week-on-week demand growth until the period around New Year’s. However, we might be surprised by another week of gains given the momentum we are seeing.