STR Weekly Insights: 1-7 October 2023

Countries included: China, Curaçao, Fiji, Indonesia, Ireland, Japan, Spain, United Arab Emirates, and United States

Analysis by Isaac Collazo and Chris Klauda

U.S. Performance

In the first week of October, U.S. hotel industry occupancy climbed to 67.8%, which was just 0.1 percentage points (ppts) higher than last year. Remember, the comparable week last year included the Yom Kippur observance on Tuesday and Wednesday (4-5 October 2022). However, increases achieved against those easier weekday (Monday-Wednesday) comparisons were offset by weaker weekend occupancy. Overall, weekday occupancy increased 1.4% year over year (YoY), while the weekend and the shoulder periods (Thursday and Sunday) declined 1.9ppts and 0.7ppts, respectively.

A more significant change was seen in average daily rate (ADR), which rose by the largest amount (+5.4% YoY) since early May and exceeded the rate of inflation. Again, easy year-over-year comparisons on weekdays likely played a role, but over the past five weeks, ADR has continued to increase steadily. Revenue per available room (RevPAR) increased 5.2% YoY, the second consecutive week at that level.

The Top 25 Markets reported weekly occupancy of 72.7%, which represented that grouping’s fourth week above 70% and 1.7ppts increase from a year ago. ADR increased 7% YoY with RevPAR rising 8.9%, the largest gain since the week ending 6 May 2023. Like the remainder of the country, growth was concentrated on weekdays, when occupancy rose 6.7ppts YoY and ADR jumped 13.5%, resulting in a 21.1% gain in RevPAR. Top 25 weekend occupancy fell 2.7ppts, while shoulder days were almost flat (+0.1ppts). RevPAR was also down over the weekend (-0.7%) but up in the shoulder period (+5.5%).

New York City led the Top 25 Markets in occupancy for weekday (87.5%) and shoulder (82.0%) periods, while Boston led on the weekend (92.6%). Both markets posted strong weekly RevPAR gains of more than 20% YoY. Chicago and Philadelphia also saw strong weekly RevPAR growth at +23.0% and +20.2%, respectively, driven by increased occupancy and ADR.

In the next 25 largest markets, weekly occupancy increased 1ppts versus a year ago with solid ADR growth (+6%), resulting in a strong RevPAR gain (+7%). Unlike the Top 25 and most of the country, weekend occupancy was up (+0.4ppts) with ADR growth (+6.3%) nearly matching the gains seen over the weekdays (+6.6%). Shoulder days were also up on all metrics.

Weekly RevPAR growth in the next 25 largest markets ranged from 26.1% YoY in Cleveland to -5% in Oklahoma City. Overall, nine markets saw double-digit RevPAR growth this week with three (Cleveland, Indianapolis, and Inland Empire, CA) above 20%.

In the remainder of the markets, weekly RevPAR grew only 0.9% YoY as occupancy fell 2ppts, which was offset by a 3% ADR gain. While overall group performance was weak, several markets reported strong RevPAR growth including Texas Central (+29.4%), Greenville/Spartanburg (+24.3%) and Missouri North (+21.5%). Weekday occupancy was also down (-0.9ppts), but RevPAR grew 2.4% on 3.3% ADR growth. Weekend RevPAR didn’t move much (+0.6%) because of declining occupancy and increasing ADR.

Across all markets, five saw occupancy above 80%, including two Top 25 Markets (New York City and Boston) and three fall foliage markets (Portland ME, Gatlinburg, TN, and Vermont). The weekend was strong in the northeast boosted by the autumn scenes along and throughout the country with college football.

With a clean week for groups, demand increased 20% YoY, helped by the easy comparison to last year. Over the past four weeks, group demand has been up an average of 12% YoY and down only 2% compared to the same four weeks in 2019. Group occupancy has increased 0.8ppts over the past four weeks compared to 2022 while coming in 2.1ppts lower than 2019.

Top 25 Markets posting the largest year-over-year group demand increases over the past four weeks are San Fransico (+20.5%), Oahu (+15.7%), Washington, DC (+10.5%), Boston (+6.8%), Philadelphia (+6.4%), and Minneapolis (6.1%).

Demand was up across the top three chain scales (Luxury, Upper Upscale, and Upscale) with even greater increases on the weekdays. The largest overall occupancy gain was seen in Luxury (+5.4ppts) with weekdays up 11.6ppts. Upper Upscale at +4.7ppts YoY posted a 9.2ppt increase on the weekdays. The largest ADR gains were in Upper Upscale (+6.0%) and Upscale (+5.2%). Upper Midscale saw occupancy decline, while ADR increased 3.1% and 5.0%, respectively. Midscale and Economy both reported occupancy declines with flat to up ADR.

Global Performance

Global occupancy, excluding the U.S, increased 0.8ppts week on week to 69.5%. As compared to last year, occupancy was up 6.8ppts, the largest year-over-year increase since May 2023.  ADR climbed to US$161, up 18.7% YoY. RevPAR grew 31.5% to US$112.

Occupancy for the top 10 countries, based on supply, showed an even larger increase (+8.2ppts YoY to 70.1%). ADR increased 17.6% to US$157, which was the highest result since the last week of June. RevPAR grew 33.1% to US$110.   

All of the top 10 countries, except Germany, saw year-over-year occupancy gains, with the largest growth recorded in China, up 16.3ppts to 63.0%. Japan posted the second highest occupancy gain, up 7.1% to 72.4%. Both countries were boosted by the autumn holidays. Spain was close behind Japan in growth, increasing 6.3% to 83.1%, which was the highest occupancy level of the top 10 countries. These three countries along with Indonesia also posted the greatest RevPAR growth.

Outside of the top 10, the highest occupancies in each continent were:

• Curaçao in the Americas (74.4%, +5.1% YoY)
• Fiji in Asia Pacific (82.1%, +0.1ppts YoY)
• Ireland in Europe (87.1%, +4.1ppts)
• United Arab Emirates in the Middle East & Africa (78.9%, +8.2ppts YoY)

Final thoughts

The fourth quarter started out with strong gains, particularly across the Top 25 Markets. While weekday comparables were made easier by the Yom Kippur holiday, weekends were soft, possibly impacted by weather, the timing of Fall school breaks, and a return to more normal travel patterns. Outside of the U.S., performance continued to show strong, double-digit RevPAR gains against easy 2022 comparisons.

Looking ahead

For the week ending 14 October 2023, we expect to get a good view of what normal performance looks like with all calendar shifts behind us. Indigenous Peoples’/Columbus Day holiday is expected to mute business travel early in the week, however, growing group demand, weekend football games, MLB playoffs, and autumn scenery seekers will continue to have a positive impact on the hotel industry. Overall, we expect occupancy to strengthen in the next three weeks before falling ahead of Halloween.