Market Recovery Monitor - 28 May 2022

Performance during the week before the Memorial Day holiday (22-28 May 2022) came in lower than expected, as U.S. hotel occupancy fell to 66.5% from 68.6% the prior week. The decrease was the largest for the week ahead of the holiday since STR began publishing weekly data in 2000. Weekdays (Monday-Wednesday) accounted for roughly two-thirds of the weekly demand decline, with the weekend (Friday & Saturday) on par with the previous week. We believe that the previous week’s demand was enhanced by university graduation ceremonies that were exaggerated by the inclusion of the 2020 and 2021 classes. Average daily rate (ADR) held steadfast, declining just 0.1% compared to the previous week, while revenue per available room (RevPAR) tumbled 3.0%.

While a letdown to previous pre-Memorial Day weeks, weekly occupancy has been above 66% six times so far this year, compared to seven times during the entirely of 2021. None of those weeks in 2021 happened before the Memorial Day holiday. As compared to previous pre-Memorial Day weeks, this week’s occupancy was in the lower half of all previous Memorial Day lead-in weeks, with the highest occupancy (71.3%) observed in 2015 and the second highest in 2019 (71%). While this year’s level was unimpressive, actual room demand was the third highest of any pre-Memorial Day week (just below 2018) and 950,000 rooms less than 2019 – the year when the most rooms were sold on record for the aforementioned time period. Additionally, this week’s room demand was the eighth highest since the start of the pandemic and second best of the year.

There is also a supply component to the lower pre-holiday occupancy seen this year versus other periods. Supply was up 1.1 million room nights over 2019 and 1.8 million over 2018. Given the strong demand seen this year, occupancy would be more comparable to those two years if supply had remained constant.

Memorial Day weekend (Friday & Saturday) occupancy (78%) was in the middle of the pack compared to previous Memorial Day weekends, with the highest Memorial Day weekend occupancy (81.4%) observed in 2016. However, weekend occupancy has been above 77% for the past three weeks – the most since last summer. More importantly, this year’s room demand was the highest of any Memorial Day weekend, surpassing 2019 (which previously held the record), and the highest of 2022 thus far.

Top 25 Markets also saw a weekly occupancy decline, but occupancy has remained above 70% for the past three weeks. Similar to the overall U.S., weekday occupancy and room demand in the major markets fell, while weekend performance was virtually unchanged from the week prior. Boston (80.2%) and Chicago (72.1%) reported their highest weekly occupancies of the pandemic-era.  Both markets also saw their highest weekday occupancy since the pandemic’s start.

Central business districts (CBDs) maintained weekly occupancy above 70% as they have in the previous two weeks. This week’s CBD occupancy (70.4%) was the fourth highest of the pandemic era. Weekday occupancy (69.7%), slipped below 70% for the first time in five weeks, but was the fifth highest since the start of the pandemic. The New York Financial District (91%), included in our list of 20 CBD markets, had the highest weekday occupancy followed by the Dallas CBD (85%).

For a third consecutive week, New York City let the nation with the highest weekly occupancy (82.8%), which is its second highest of the pandemic-era, behind last week’s record. Hawaii/Kauai and Boston were the only other markets with weekly occupancy above 80%. The highest weekday occupancy was also seen in New York (84.3%), which was the only market to have weekday occupancy above 80% this week. Weekend occupancy was led by Boston (92.5%), with Rhode Island and Sarasota, FL, also reporting weekend occupancy above 90%. In total, 61 of the 166 STR-defined markets saw weekend occupancy above 80% – the second highest number of markets this year behind what was seen three weeks ago.

ADR remained well above the pre-pandemic level, rising to a 22% premium over 2019. It should be noted that this week compared to 2019 is somewhat non-comparable as the Memorial Day holiday was a week earlier in 2019. Accounting for the holiday shift, this year’s ADR was 13% higher than in pre-Memorial Day week of 2019. On an inflation-adjusted basis and accounting for the holiday shift, real ADR was equal to 2019.  As compared to previous weeks of the pandemic-era, weekly ADR (US$152) was the fourth highest since March 2020. On an inflation-adjusted basis, weekly real ADR (US$134) was the seventh best since the start of the pandemic. Weekend ADR ($174) was the second highest of the pandemic-era. As compared to 2019 Memorial Day weekend, this year’s real ADR was 11% higher.

Weekly RevPAR (US$101) was the fourth best since the start of the pandemic and 26.2% higher than in 2019, but when accounting the holiday shift, this week’s RevPAR was 7% less than in 2019. Given the shift in the holiday week versus 2019, nearly all markets saw weekly RevPAR at the “peak” category (RevPAR indexed to 2019 above 100). Using real RevPAR and accounting for the holiday shift, 40% of the 166 STR-defined markets were at “Peak” with another 51% in “Recovery” (RevPAR indexed to 2019 between 80 and 100). Over the past 28 days, which incorporates the same four weeks and accounts for the holiday shift, 83% of markets were at “peak” RevPAR. Real RevPAR on a 28-day basis has 54% of markets at “Peak” and an additional 42% in “Recovery”. This year’s real RevPAR on Memorial Day Weekend was 9% higher compared to the same weekend in 2019.  

Around the Globe
Outside of the U.S., week-over-week occupancy increased 0.6 percentage points to 63.4%. ADR increased 4.1% to $129.15, resulting in a 5.2% RevPAR increase. Forty-two of the countries tracked on a weekly basis saw a week-over-week drop in occupancy – a regression compared to the previous week. 

When looking at specific countries, Monaco saw a 9.4 percentage point increase in occupancy and a 229.7% ADR increase compared to the previous week due to the Monaco Grand Prix, which took place on 29 May. Occupancy in the United Kingdom (80.1%) increased 1.4 percentage points, 0.8% ahead of the comparable week in 2019, with ADR rising 5.3%, which was 21.2% ahead of 2019 levels.   

Ireland continued to achieve strong occupancy (87.3%) with Dublin at 92.2%. Some of the demand is being driven by hotels housing Ukrainian refugees, which we expect to moderate in the coming months. Northern Europe again saw the highest occupancy (79.7%) of any subcontinent, up 1.2 percentage points compared to last week, with Northeastern Asia reporting the lowest level (51.2%).

From a market perspective, STR-defined Switzerland Southeast and Southwest markets saw double-digit increases in occupancy compared to the previous week, up 19.7% and 13.0%, respectively. This was driven by strong weekend performance in Berner Oberland, Interlaken and Ticino. Cardiff also saw strong occupancy gains, up 7.2 percentage points to 67.5%, driven by two Ed Sheeran concerts on 27-28 May. 

Over the past 28 days, 20% of non-U.S. markets remained in “Recession” (RevPAR indexed to 2019 between 50 and 80) with another 4% in “Depression” (RevPAR indexed to 2019 under 50). This is an improvement compared to the previous week. As numerous regions enter busy summer season and release the majority of COVID restrictions, we expect this improvement to continue

Big Picture
We expected more from the week given the strong TSA screening numbers ahead of Memorial Day weekend. It appears that our optimism was bolstered by the strong performance in the week prior that now looks to have been driven somewhat by larger-than-normal university graduations and supplemented group activity ahead of summer’s start. Given that room demand for this year’s Memorial Day lead-in week was the third best of the past 23 years, we remain steadfast on our outlook for a strong summer.