Market Recovery Monitor - 22 October 2022

During the week of 16-22 October 2022, U.S. hotel occupancy was almost flat, dipping 0.4 percentage points (ppts) week over week (WoW) to 69.9%. That level was the seventh highest for this particular week since 2000 and 0.3ppts less than in 2019. The week-over-week slowdown is normal as performance for this specific week has only gone up four times in the past 23 years. Moreover, this year’s weekly demand decrease was among the lowest seen, falling 142,000 room nights. In 2019, demand fell WoW by 755,000 room nights. At the same time, available rooms are up 887,000 from 2019. Thus, if supply had held static to 2019 levels, occupancy for the week would have been among the best seen. Nominal average daily rate (ADR) was flat (-0.1%) WoW at US$157 with real (inflation-adjusted) ADR 1.1% higher than in 2019. Nominal revenue per available room (RevPAR) decreased 0.7% WoW to US$110. Real RevPAR was just slightly better than in 2019.

Over the past two weeks, 9-22 October 2022, occupancy averaged 70.1%, which the 6th highest average for this specific period since 2000. Occupancy has only surpassed 70% over this two-week period in seven of the past 23 years. In 2019, occupancy was 1.1 percentage points (ppts) higher. However, the number of rooms sold in the fortnight was the highest recorded by STR, up 370,000 room nights as compared with 2019.

Occupancy in the Top 25 Markets surpassed 75% for a second consecutive week. A week prior, the group reported its highest occupancy since the start of the pandemic (75.3%). Despite the solid performance, Top 25 occupancy in the fortnight was down 4.1ppts versus 2019 and room demand trailed 2019 as well as 2018. The weakness came from four of the largest markets in the country: Chicago, New York City, San Francisco, and Washington, D.C., where demand was 12% lower on average than in the same two weeks of 2019. San Francisco had the largest demand deficit, down 19% versus 2019. However, nine of the Top 25 Markets had higher demand over the fortnight than in 2019, including Atlanta, Boston, Miami, Nashville, Orlando, and Phoenix. In total, Top 25 demand was down 3% over the past two weeks versus 2019. And, while New York City was still at a deficit, the market had the nation’s highest occupancy (88.6%) for the week ending 22 October.

Outside of the Top 25, occupancy was nearly flat over the past two weeks with the latest week’s level hitting 67.5% (-0.4ppts WoW). The highest occupancy outside the Top 25 was posted in areas affected by Hurricane Ian. Both Sarasota and Fort Myers had occupancy surpass 86% in the week. Sarasota saw a similar level in the prior week, while Fort Myers’ occupancy represented a 3.9ppt gain week on week.

Weekday (Monday - Wednesday) occupancy across the U.S. increased to 69.4%, up from 67.9% in the prior week. This was the highest weekday occupancy since late July. The Top 25 Markets did even better with occupancy increasing to 75.1%. NYC led the nation in weekday occupancy (90.7%) followed by Boston (86.8%). Most of the Top 25 had weekday occupancy above 70%, with the lowest level seen in Minneapolis (60.7%). Overall, weekday occupancy increased 1.2ppts WoW in the Top 25 Markets. Weekday occupancy outside the Top 25 Markets was 66.6%, up 1.5ppt WoW.

Central Business Districts (CBDs) also did well with weekday occupancy rising to 77.3%. CBD weekday occupancy has been above 75% in five of the past six weeks. Three of the 20 CBDs tracked weekly saw occupancy surpass 90%, led by the Nashville CBD and followed by the Boston CBD and the New York Financial District.

Group demand was somewhat responsible for the strong weekday showing, rising to its second highest level since the start of the pandemic. Weekday occupancy for large (300+ rooms) urban, luxury and upper upscale class hotels in the Top 25 Markets reached 80.6%, which was the third highest level for that segment since the start of the pandemic but nearly nine percentage points lower than in the same week of 2019. This was only the third time since the start of the pandemic that occupancy for these types of hotels has surpassed 80%. The group’s highest weekday occupancy of the pandemic-era (82%) was seen five weeks prior.

Luxury (75.2%) and Upper Upscale (75.4%) hotels also saw their highest occupancy of the pandemic-era. As compared with the same week in 2019, occupancy for the two chain scales was more than five percentage points lower with the gap to 2019 trending down. While not at a pandemic-era high, Upscale and Upper Midscale hotels also reported occupancy above 70% for the week. The lowest weekly occupancy was in Economy hotels at 61%.

Weekend occupancy slid for a second week, down 1.2ppts WoW to 77.8%. As compared with 2019, occupancy over the weekend was nearly three percentage points higher. Over the last six weeks, the average gap was -0.8ppts. Top 25 Markets have seen stronger weekend occupancy with the last three weeks above 80%, led by Boston and New York, which both saw the measure above 90% this past weekend. The highest weekend occupancy was seen in Gatlinburg/Pigeon Forge, TN (96%) followed by Madison, WI (93%). Austin reported its highest weekend occupancy of the year (93.2%) due to the Formula 1 race held in the city. Since 2019, weekend occupancy has only been above 90% a total of 11 times.

Nominal ADR remained well above 2019 with the most recent week’s level 17% higher. As compared with a year ago, ADR was also 17% higher. Real ADR has been above 2019 for the past six week and in 23 of the past 52 weeks. Nominal ADR in the Top 25 remained above US$190 for a second week with the weekday level above $193. Top 25 real ADR is nearing 2019 levels with the most recent week’s value 3% lower.

Over the past 28 days, nearly every market (89%) had nominal RevPAR above 2019. Using real RevPAR, 53% of markets reported the measure above 2019, led most recently by Sarasota, FL. Among the Top 25 Markets, Anaheim, Miami, Orlando, Phoenix, San Diego, Tampa, and Norfolk/Virginia Beach all had higher real RevPAR than 2019. Overall, Top 25 real RevPAR was 8% lower than in 2019 with San Francisco seeing the lowest value.

Only seven markets were still classified as being in “recession” (real RevPAR between 50% and 80% of 2019). This group included Minneapolis, Oakland, Portland, San Francisco and San Jose.

Around the Globe 
Outside of the U.S., occupancy increased WoW by 0.5 percentage points to 65.8%. This was 8.8ppts behind the comparable week in 2019. While up, 54 of the countries tracked on a weekly basis saw a week-over-week drop in occupancy. Northern Europe again saw the highest occupancy (79.8%) of any subcontinent, while Northeastern Asia came in the lowest (50.3%). Nominal ADR increased 0.5% WoW to US$146, which was 20% ahead of 2019. Nominal RevPAR was up 1.3% WoW to US$96, 9% higher than in 2019.

Among the 10 largest countries (based on supply), occupancy was up 1.8ppt WoW to 63% as only three saw occupancy retreat (France, Italy, & the U.K.). Italy saw the largest WoW decline (1.8ppts) in that group while the remaining countries saw a fall less than 0.5ppts. Nominal ADR increased 2.4% WoW with nominal RevPAR advancing 5.5% WoW. ADR was ahead of 2019 (+15%) whereas RevPAR was behind (-3%).

Brazil reported a 12.2 percentage-point increase in occupancy from the previous week and was 1.6 percentage points ahead of the comparable week in 2019. The change came from double-digit growth across Sao Paulo, Brazil South, Brazil North, and Brazil Central & West markets. Despite this increase, ADR fell 6.1% WoW.

Germany and France saw strong ADR increases week over week, up 15.0% and 12.8%, respectively. As compared with the previous week, ADR in Dusseldorf, Cologne, and Frankfurt was up by more than 40% due to high-impact events, including K International and Optatec. The Equip Auto fair also propelled

Paris and the surrounding areas with Paris ADR rising by more than 10% WoW.

Over the past 28 days, 19% (66 of 344 markets) of non-U.S. markets remained in “Recession” (Real RevPAR indexed to 2019 between 50 and 80) while 5% (16 markets) were in “Depression” (real RevPAR indexed to 2019 under 50). Nealy half (47%) of all non-U.S. markets had real RevPAR above 2019 over the past four weeks.

Big Picture 
Based on past history, the peak of the fall travel in the U.S. is likely behind us. We expect room demand to fall in the week ending 29 October due to Halloween, which is on a Monday this year. Looking back at the years with the same day of week composition as 2022, demand from Sunday through Thursday (30 October-3 November) will fall by about 5% week on week. In both 2019 and 2021, we saw a larger decrease as Halloween was on Thursday and Sunday, respectively. For the weekend (4-5 November), demand will show a larger decline (~-9% WoW) with the full week down around 7% WoW. The following week (week ending 12 November) will also be down (~-5% WoW) given that Halloween is on Monday. This is all fully expected based on previous history and is not related to the current economic or sentiment environment. Thereafter, demand will rise week on week until the week of Thanksgiving.