Market Recovery Monitor - 5 November 2022

With Halloween on Monday during the week of 30 October through 5 November (week 45), U.S. hotel demand and occupancy saw a sharp decrease Sunday and Monday with the declines lingering into Tuesday and to a lesser extent Wednesday. As a result, weekly demand fell 5.7% week on week (WoW), slightly more than expected. Weekly occupancy dropped to 62.4%, its third consecutive weekly decline. As compared to the seven other times since 2000 when Halloween was in week 45, this year’s weekly occupancy was the third highest. Some of the impact to occupancy is supply related, as room demand for the week was the highest of the times Halloween was in week 45. Compared to all other week 45 results, demand was the fourth highest.

Nominal average daily rate (ADR) also fell 3.7% WoW to US$148, leading to an 8.6% decrease in nominal revenue per available room (RevPAR). This was the second week that RevPAR fell by more than 8% WoW. Real (inflation-adjusted) ADR and RevPAR also decreased, with both measures below what was seen in 2019. However, in 2019 there was no impact from Halloween as it fell on the previous Thursday that year. As compared to last year, ADR and RevPAR were 15% and 20% higher, respectively.

Reviewing past Halloween weeks regardless of which week it fell in (44 or 45), this year’s demand was the highest on record, previously held in 2019. Occupancy, however, was the sixth highest of the 23 years of data but close to the level seen in 2019 (62.4% vs. 62.5%).

Demand on Sunday and Monday fell nearly 20% WoW as travelers stayed home for Halloween and meeting planners paused group events, evident by the more than 50% WoW drop in group demand (among conference hotels in the Luxury and Upper Upscale chain scales) on those two days. The resurgence of group business was swift, however, as the decline moderated significantly on Tuesday with strong week on week gains thereafter. Thursday’s group demand was the highest of the fall conference season thus far. The general industry also saw demand bounce back post-Halloween. Excluding Sunday and Monday, demand was nearly flat week over week with occupancy of 68.2%. Weekend (Friday & Saturday) reached 73.1% in the metric.

While most saw demand drop in the week, 24 of the 166 STR-defined markets reported growth including Charlotte, Miami, and New Orleans. All three markets also reported occupancy above 70% for the week, with occupancy strengthening into the weekend. Even when including markets that lost demand due to Halloween, 22 had occupancy above 70% for the week with Fort Myers (84.4%) at the top followed by New York City (82%). From Tuesday onwards, 54 (33%) of markets had occupancy above 70%, led by NYC (87.6%) and Fort Myers and Phoenix (both at 85%). Fort Myers continues to see elevated occupancy post-Hurricane Ian, a result of rebuilding efforts and housing of those impacted by the storm.

This weekend wasn’t the strongest of the fall season so far, but it wasn’t the worst either. Occupancy in half of all U.S. markets pushed above 70%, with nearly a fifth above 80%, led by Chattanooga, TN (92.5%), and NYC closely behind (91%).  The number of markets with weekend occupancy above 70% was more than in the previous week but less than three weeks ago.

Among the Top 25 Markets, full-week occupancy was 68%, the fourth best of the weeks when Halloween fell in week 45. As compared to all Halloween weeks (44 or 45), occupancy for the Top 25 was the ninth highest, with the highest Halloween occupancy observed in 2016 (72.6%), when the holiday was also in week 45 and on Monday. In Halloween week 2019, Top 25 occupancy reached 69.9%, nearly two percentage points higher than this year’s results. Room demand was also the highest in that year among the Top 25 Markets, with this year’s level the second best. Recall, in that year, Halloween was in week 44 and on a Thursday.

From Tuesday to Saturday, Top 25 Market occupancy increased to 74.2%, slightly above the level seen a week ago, but below the level seen in 2016 when occupancy during that period reached 79.1%. However, this year’s room demand from Tuesday through Saturday was the highest ever seen for a Halloween week when the holiday fell in either week 44 or 45. All but five Top 25 Markets saw occupancy surpass 70% after Halloween. Weekend occupancy for the Top Markets climbed to 78.3% from 74.3% a week prior, as NYC led in weekend occupancy and seven other Top 25 Markets reported weekend occupancy above 80% including Chicago, Los Angeles, Nashville, and Orlando. Boston, New Orleans, and Philadelphia were right below the 80% mark.

Central business districts (CBDs) saw a similar pattern, as most markets saw occupancy bounce back after Halloween. Seven of the 20 CBDs saw occupancy top 80% from Tuesday onwards, with the New York Financial District leading (87%).

As with demand and occupancy, the decrease in nominal ADR lessened after Halloween with growth returning on Thursday onwards, but the increase was minimal (+0.3%) with weekend ADR up just 0.2% WoW. Overall, ADR from Tuesday through Saturday was down 1.3% WoW. Even with the stunted movement, nominal ADR remained well above 2019 post-Halloween (+13%) with real ADR just below the 2019 level. Weekend real ADR, however, surpassed 2019 by 5%.

A few markets (35) bucked the downward trend in ADR with 10 reporting nominal ADR growth of more than 10% WoW including Miami (+15%) and other smaller markets like Chattanooga (+29%) and Lexington, KY (+45%), which led the nation in week-over-week nominal ADR gains. More markets saw nominal ADR growth over the weekend (76) with college football locations seeing strong WoW gains.

Nearly all markets (151 of 166) had nominal 28-day RevPAR above 2019 with Oakland, Portland, OR; San Francisco, and San Jose as notable exceptions. More than half of all markets (57%) had real, 28-Day RevPAR above 2019 with Sarasota and Fort Myers leading the way. Six of the Top 25 Markets also had real, 28-day RevPAR above 2019 including Miami, Orlando, San Diego, and Tampa.

Around the Globe
Outside of the U.S., week-over-week occupancy decreased by 4 percentage points (ppts) to 60.2%. This is 10.9 percentage points behind the comparable week in 2019 – a marked slowdown compared to the prior week. ADR also dropped 2.7% to US$134 compared to the previous week, which was 9.6% ahead of 2019. Seventy-eight of the countries tracked on a weekly basis saw a week-over-week drop in occupancy and ADR. 

India reported a 16.7 ppt increase in occupancy, which is 12.4 ppts behind the comparable week in 2019. This was driven by boosts in key cities such as New Delhi, Bengaluru, and Hyderabad – a bounce-back following the Diwali holidays. Egypt saw a week-over-week ADR increase, up 36.2% to EGP3,353.05, driven by a currency devaluation in recent weeks. Occupancy in the country, however, fell 4.8ppts. Frankfurt saw a staggering 86.0% week-over-week ADR increase, boosted by CPhi Worldwide, which took place 1-3 November. The United Arab Emirates saw the highest occupancy levels of any country (83.5%), up 1 ppt against the pre-pandemic comparable. ADR also rose 9.6% WoW in the country, a result of the ADIPEC conference which took place in Abu Dhabi, which saw rates boost by 58.4% WoW. Northern Europe once again saw the highest occupancy (75.0%) of any subcontinent, while Central America reported the lowest (48.6%).

Over the past 28 days, 50% of non-U.S. markets have seen real RevPAR above 2019. There are still 66 (out of 344) markets that are in “Recession” (real RevPAR indexed to 2019 between 50 and 80) and 18 in “Depression” (Real RevPAR indexed to 2019 under 50). 

Big Picture
The hotel industry continues to perform within expectations. The movement of demand over the past several weeks aligned itself with the performance of past years and had little to do with the economy or other environmental factors. This year’s Halloween shift to week 45 also made comparisons to 2019 less favorable. For the week ending 12 November, expect all measures to see sizable growth. Thereafter, we will likely experience a fortnight of declines ahead of and during Thanksgiving.