Market Recovery Monitor - 26 November 2022

Key Takeaways
 

• Although down from last year’s record-breaking levels, Thanksgiving week performance in the U.S. was normal.
• Destination markets posted the highest occupancy in the U.S.
• New York City’s return to normalcy continues
• Global occupancy was down.
• Qatar picked up early wins from the World Cup.
• Caribbean/Latin American countries, like Barbados, are generating momentum as vacation season begins.

In what turned out to be a normal Thanksgiving week, U.S. hotel occupancy for 20-26 November was 50.4%. That was down from 52.9% a year ago and 50.6% in 2019. Nearly every market saw occupancy fall year over year despite more airline travel, which was 95% of 2019’s volume. A year ago, 89 of the 166 STR-defined U.S. markets saw occupancy above 50%. This year, 64 markets saw the same, which was close to the tally in 2019.

Recall, last year’s occupancy was the highest ever recorded for Thanksgiving week due to the aftermath of COVID lockdowns, which created pent-up demand and a greater desire to be with friends and family during the holiday.

Room demand was the second highest seen for Thanksgiving week going back to 2000. Last year’s Thanksgiving week was somewhat of an anomaly. As a ratio to the U.S. population, 6.1 of every 100 Americans booked a room in 2021 as compared with 5.9 this year. Additionally, 2021’s per capita amount was the highest ever seen while this year’s is in line with 2018/2019 and well beyond others. While many will ascribe this year’s Thanksgiving “weakness” to economic headwinds, the comparison to last year may be unfair given how unusually strong the week was a year ago. This year’s Thanksgiving week was normal and solid when considering historical context.

Not surprising, destination markets posted the highest occupancy for the week, led by the Florida Keys (75.4%) and Gatlinburg/Pigeon Forge (75.4%). All three Hawaiian markets showed occupancy at or above 70%, making the state’s occupancy the best in the nation. Florida and New York markets also did well. Fort Myers continued to see strong occupancy as restoration post-Hurricane Ian continues. New York City’s return to normalcy continued with the market posting the nation’s fifth highest occupancy (72.1%). Overall, 64% of markets saw this week’s occupancy surpass the level seen in 2019, underscoring the strength of this holiday this year.  

Nine of the Top 25 Markets, including Atlanta, Nashville, and Phoenix, experienced higher occupancy this holiday week than in 2019, albeit the levels were lower than those seen in a typical fall week. New York City led the Top 25 in occupancy followed by Oahu. Other Top 25 Markets with solid demand included Anaheim/Orange County (64.4%), Miami (63.7%) and Orlando (63.6%). However, those markets trailed the levels seen three years ago.

Among the segments, the highest weekly occupancies were seen in Upscale and Upper Midscale hotels, which topped 52% and increased to 60% Thursday to Saturday. Both chain scales noted their second highest Thanksgiving week room demand behind last year’s record levels. Luxury and Upper Upscale trailed other hotel types with weekly occupancy below 50% as well as extended weekend levels staying in the 50s. Occupancy for these hotels was significantly off from previous holiday weeks with room demand ranking sixth of the past 23 Thanksgiving weeks. Interestingly, these two chain scales saw the same relative position last year compared to the remaining hotel types.

By day of week, occupancy was below 50% through Wednesday, climbing above that level from Thursday onwards. The level reached 56.8% over the last three days of the week, which was 2.2 percentage points (ppts) lower than in 2019 and 3.4ppts from a year ago.

Nominal average daily rate (ADR) was the highest ever seen (US$135) for a Thanksgiving week, up 5% from a year ago. That year-over-year (YoY) growth was the lowest observed in some time. A week ago, ADR was up 14.1% year on year. Real (Inflation-adjusted) ADR was the second highest since 2000, below last year’s result and above 2019. Thanksgiving Day nominal ADR reached US$141, also the highest since 2000 when weekly reporting began, but real ADR was lower than a year ago. Real ADR for both the week and Thanksgiving Day remain well ahead of 2019, up more than 4%.

Maui had the highest ADR of any market this week, which increased 13% YoY to US$680. The next closest was Hawaii/Kauai at US$434, up 10.6% from a year ago. Most markets (80%) reported year-on-year growth in ADR with a minority (17%) seeing an increase of more than 10%, including New York City, Palm Beach, FL, and Portland, OR. However, most of the high growth ADR markets were small or rural with several growing because of weekend college football games. Thirty markets saw weekly ADR fall, led by Louisiana South (-21%), which saw inflated ADR a year ago from the aftermath of Hurricane Ida. The Florida Keys and Miami also saw ADR retreat with the former dropping 15.5% and the latter down 4.7%. Even with the decline, ADR for the Florida Keys was 40% greater than what it was during Thanksgiving week 2019 and Miami was 25% greater. Real ADR was also ahead of 2019 for both markets. Hawaii/Kauai, Maui, Nashville, Palm Beach, FL, and several others reported their highest Thanksgiving week real ADR since 2000.

With the year-over-year decrease in occupancy and lower ADR growth, nominal revenue per available room (RevPAR) was flat to slightly down compared with last year at US$68. Half of all markets saw nominal RevPAR advance this week. Like ADR, markets with larges gains in RevPAR were mostly small/rural and led by weekend college football games. Minneapolis (+32%) led the Top 25 Markets followed by Oahu and New York City, seeing growth of 31% and 11% respectively YoY. While nominal RevPAR was flat, real RevPAR trailed 2016, 2017, 2018 and 2021, but surpassed 2019.

A week ago, 106 (64%) of markets had 28-day real RevPAR above their 2019 values—the most since the start of the pandemic. With the Thanksgiving holiday, that number of markets dropped to 96 with most of the others markets in STR’s “recovery” category as real RevPAR for these markets was between 80% and 100% of the 2019 comparable. Only four markets (Oakland, Portland OR, San Francisco, and San Jose) remain in “recession” (real RevPAR between 50% & 80% of 2019).

Around the Globe 

Outside of the U.S., occupancy decreased 0.9ppts WoW to 63.6%. This was 5.3ppts behind the comparable week in 2019 but up 10ppts from last year. Sixty-five of the 103 countries tracked on a weekly basis saw a week-over-week drop in occupancy, but on a year-over-year basis, only 15 countries decreased. Nominal ADR decreased 1.1% WoW to US$131, which was 20% ahead of 2019. Nominal RevPAR fell 2.5% WoW and advanced 46.5% from a year ago.

The 2022 FIFA World Cup propelled occupancy in Qatar by 35.6ppts WoW to 86.2% with ADR increasing 93.7% WoW to US$730 (the highest weekly level in the globe). At the same time, Qatar did not have the world’s highest occupancy for the week as that honor went to Barbados (86.2%). However, it is important to note that Qatar has 5.7 times more rooms to sell than the island nation. STR will report in more detail on the World Cup impact in the coming weeks.

Barbados joins several other Caribbean and Latin American countries who are benefiting by the start of the vacation season. Jamaica, Aruba, Puerto Rico, Mexico & the Cayman Islands all reported strong demand and ADR growth.

Northern Europe saw the highest occupancy of any subcontinent (76.0%), yet this was down 1.4ppts compared to the previous week, which is expected as we move into the shoulder months. Northeastern Asia saw the lowest occupancy at 56.6%, due to continued limitations in China travel.  

Over the past 28 days and using real RevPAR, 77 of non-U.S. markets remained in “Recession” and eight were in “Depression” (Real RevPAR indexed to 2019 under 50) with most of those markets in China. While down from a week ago, the number of markets at peak real RevPAR (Real RevPAR indexed to 2019 under 50) remained high (49%) led this week by the Red Sea Resorts.

Big Picture

Thanksgiving week 2022 was solid despite year-over-year declines in both occupancy and ADR. While one could argue that last year was the gold standard for the holiday week and a goal to target, based on previous holiday weeks, it seems that last year was more of an anomaly based on pandemic-induced demand. Either way, we shouldn’t look at this year’s result as a sign of pending difficulties. While next year could be difficult, the next few weeks are expected to remain robust with sharp demand gains over the next two weeks ahead of the Christmas holidays.