Market Recovery Monitor - 29 October 2022

A decrease in U.S. hotel demand and occupancy for the week of 23-29 October was expected and not as steep as previous years. The largest week-over-week declines were seen over the weekend (Friday & Saturday) with demand down 11% as travelers stayed home ahead of Halloween. The weekend accounted for 58% of the weekly fall in demand. Even with the decrease, room demand for the week was the highest for this specific week over the past 23 years. Weekly occupancy was 65.8%, down from 69.9% a week prior. In 2019, occupancy for the week was 62.5% as Halloween fell on a Thursday that year versus the following Monday this year. Nominal average daily rate (ADR) fell 2.9% week on week (WoW) to US$153, which was 21% higher than in 2019 and 19% greater than a year ago. With the fall in both occupancy and ADR, nominal revenue per available room (RevPAR) retreated 8.6% WoW to US$101, up 28% over the same week in 2019 and 34% higher than a year ago. Adjusting for inflation, both revenue measures were ahead of 2019 with real RevPAR 11% higher than what it was three years ago.

In 15 of the past 23 years, Halloween has fallen in this specific week (week 44). This year, Halloween was on the Monday of week 45 for only the fourth time since STR began benchmarking daily data (2022, 2005, 2011, 2016). While the WoW demand drop (-5.9%) was among the largest seen since the start of the year, compared with the previous three times that Halloween was on a Monday, this year’s decrease was the smallest. Even if we include the three times that Halloween fell on the Sunday of week 45, this particular WoW demand loss was the smallest. Of course, in the weeks that have had Halloween in week 44, the WoW demand drop was more than double what we saw this year. Thus, the demand decline for the week was normal with another expected for week 45.

While room demand decreased sharply over the weekend, weekend occupancy (69.4%) was the seventh highest ever for week 44. As compared with similar weekends, the occupancy level was second, just behind 2016 (69.8%). The highest weekend occupancy was seen in 2017 (74.3%) when Halloween fell on the Tuesday before that weekend. Nearly every market saw occupancy drop WoW with only a handful reporting growth, including Des Moines, Houston, Palm Beach, Syracuse, and a few others. Nineteen of the 166 STR-defined U.S. markets saw weekend occupancy surpass 80%, including Boston, Los Angeles, and New York City. The highest weekend occupancy was seen in Fort Myers (86.1%) followed by Gatlinburg/Pigeon Forge (85.4%).

With the holiday pushed into the next week, the weekday WoW decrease in demand (-3.2%) was among the smallest seen and less than what was seen in like weekdays in 2005, 2011 and 2016. Because of Halloween, week 44 weekday demand has fallen in every year since 2000 with the smallest decrease occurring in 2000 (-2.3%) when the holiday was on a Tuesday of the following week (week 45). Weekday occupancy was 67.1%, which was down from 69.3% a week earlier, has been at or above 65% for the past seven weeks. For a second consecutive week, New York City led the nation with the highest weekday occupancy (88.8%) followed by Fort Myers (86.1%). More than one quarter of markets had weekday occupancy above 70%. A week ago, a third of markets were at that level.

Weekday occupancy for the Top 25 Markets also fell but remained solid at 73.8%, down from 75.0% the week prior. The largest occupancy decreases were in Orlando and San Francisco, where weekday occupancy fell by more than 9 percentage points (ppts). A drop in group demand accounted for most of the decrease in both cities. On the flip side, Chicago and Detroit saw weekday occupancy advance by more than 8ppts on strengthening group. Eleven of the Top 25 Markets had weekday occupancy at or above 75% with Boston, New York, and Phoenix above 80%. Chicago was at 79.2%, which was Chicago’s sixth highest level since the start of the pandemic. Weekday occupancy also advanced in Dallas to 79%, which was the market’s best such level since early 2020. For the full week, Top 25 occupancy dropped 3ppts to 72%, while ADR fell 2.7%.

Central Business Districts (CBDs) bucked the trend with weekday occupancy rising to 78.4% versus 77.3% in the prior week. Six of the 20 CBDs saw weekday occupancy at or above 85% including the Boston CBD, Chicago CBD, Dallas CBD/Market Center, Denver CBD, Nashville CBD, and New York Financial District. CBD weekday ADR advanced 1.5% to US$261, which was the third highest pandemic-era level and 33% higher than a year ago. Full-week occupancy remained strong at 74.5% but was down week on week with ADR falling 5% WoW.

As we have seen nearly all year, weekly nominal ADR (US$153) was the highest ever recorded for week 44. Even when adjusting for inflation, the level was the third best. The highest market ADR remained in Maui (US$499), which has led the nation for most of the year. Mau’s ADR was down 3.5% WoW. Fort Lauderdale the largest week-on-week gain (+24%) followed by Indianapolis (+19). Most market were down given the impact of Halloween. Among submarkets, the highest ADR was in Key West (US$438), which was up 29% WoW. The largest WoW ADR increase was in Tallahassee (+70%) for the Georgia Tech vs. Florida State football game, which drove weekend ADR up 159% WoW.

With declining occupancy and ADR, RevPAR was down in most markets, but nine saw growth of more than 8% WoW, led by Fort Lauderdale (+36%). Even with the decrease during the week, 106 of the 166 markets had real RevPAR above 2019 levels over the past 28 days. With continuing clean up and restoration efforts, Sarasota and Fort Myers had the highest real 28-day RevPAR above 2019 of any markets (+115% and +61%, respectively). Among the Top 25 Markets, Tampa and San Diego led with real 28-day RevPAR more than 20% greater than the 2019 comparables. Only three markets were in the “recession” category (real RevPAR between 50% and 80% of 2019) with all three in northern California.

Around the Globe 
Outside of the U.S., occupancy increased 0.1 percentage points WoW to 64.2%. This was 4.5ppts behind the comparable week in 2019 – an improvement on the prior week. ADR was essentially flat at US$140, which was 25% ahead of 2019. Forty of the countries tracked on a weekly basis saw a week-over-week drop in occupancy and ADR. 

Among the top 10 countries based on supply, weekly occupancy was flat at 63.4%, led by the U.K. (81.6%), which was up 0.8ppts WoW. Germany saw a solid occupancy gain (1.5ppts WoW) with occupancy rising to 74.2%. Germany also continued to see strong ADR growth, up 17.8% WoW to US$165, led by Munich (+181% WoW), which was driven by the Bauma 2022 construction trade fair. Occupancy also advanced in Mexico (+1.1ppts to 66.9%) and Japan (+0.9ppts to 72.9%). China also saw growth (+1.7ppts WoW), which was the largest weekly gain among the top 10, but the country continued to report the lowest occupancy of the group (48.8%).

Among other countries, Morocco reported a 5.2ppt increase in occupancy, which was 1.9ppts higher than in 2019. The country also saw an 18.2% WoW ADR increase, boosted by strong weekend performance stemming from increased marketing and school holidays, which are taking place across several European countries. Northern Europe again saw the highest occupancy (80.3%) of any subcontinent, while Central & South Asia with the lowest (48.8%).

Over the past 28 days, the majority (51%) of non-U.S. markets had real RevPAR above 2019 for the comparable period and only 19% remained in “Recession.” 

Big Picture 
The week’s performance was what we expected. In the coming week (ending 5 November), expect the largest demand declines to be centered on the weekdays (~-8% WoW) with the largest decreases on Sunday and Halloween Monday. Thereafter, demand will recover and likely grow WoW from Thursday through Saturday. Even with the growth later in the week, demand will be down for the entire week by about 5% WoW. Demand will then rise before falling during Thanksgiving week.