STR Weekly Insights: 12-18 February 2023

Countries included: United States, United Kingdom, China, United Arab Emirates, Saudi Arabia, Barbados, Aruba, Puerto Rico

U.S. performance

On the back of a solid Presidents’ Day weekend, U.S. hotel occupancy reached a 13-week high (60.8%) with an increase of 1.9 percentage points (ppts) versus the comparable week last year. Average daily rate (ADR) improved 10% year over year (YoY) to US$156, the second-highest level in the metric since October (behind the week ending 31 December 2022). Revenue per available room (RevPAR) gained 13.5% YoY to US$95. Both ADR and RevPAR were well above 2019 for the same holiday week by roughly 18% with inflation-adjusted ADR (real) -1.7% below 2019’s level. Real RevPAR was further in arrears to 2019 (-6%).

Over the past 24 years (excluding 2021), weekly occupancy that includes the Presidents’ Day holiday weekend has ranged from a high of 64.5% in 2015 to a low of 53.9% in 2010. This most recent level for 2023 ranked 16th out of the 24 occurrences. The largest year-over-year gain in occupancy was seen in New York City (17.4ppts), followed by Orlando (10.6ppts) and Washington, D.C. (10.4ppts). Overall, 60% of markets saw year-over-year gains in weekly occupancy. Among the Top 25 Markets, all but four saw occupancy gains with the measure rising 5.1ppts overall for the Top 25 Markets. Miami and Tampa led the Top 25 with weekly occupancy above 80% even though both saw year-over-year decreases. Overall, the Florida Keys saw the nation’s highest occupancy (88.3%). Of the 10 markets with the highest weekly occupancy, eight were in Florida.

Weekend (Friday & Saturday) occupancy soared to 74%, which was the highest level since mid-October. While the weekend gain represented an impressive 12.7ppt increase from the previous week, weekend occupancy was up just 0.4ppts year over year and ranked seventh among Presidents’ Day weekends. Weekend room demand, however, was the second highest for this particular period with 2020 the leader by a mere 89,000 room nights. More than half of all markets were above 70% over the weekend with 13 topping 90% including Las Vegas, Miami, New Orleans, Orlando, and Tampa. Daytona Beach (91.2%) saw strong occupancy with its annual hosting of the Daytona 500. While weekend occupancy rose overall, 58% of markets saw occupancy decline year over year.

With all three days accounted, this year’s Super Bowl weekend had the second highest RevPAR (US$468) since 2000 with the 2020 game in Miami (US$519) the leader. Occupancy for the three days reached 86.9%, which was the 12th highest of the past 24 years. Of the past 10 years, this year’s Super Bowl weekend occupancy was the fourth highest. Phoenix last hosted the Super Bowl in 2015. In that year, its occupancy was 93.7%, which was the highest Super Bowl occupancy of the past 10 games. While this year’s occupancy failed to surpass 2015, the market did sell more rooms than in 2015 (+2.9%). Supply gains over the last eight years were the difference in occupancy. ADR over the three days was US$538, which was 61% higher than in 2015 and 44% higher than a year ago when Los Angeles hosted. Like RevPAR, 2023’s ADR was the second highest ever behind Miami. Real ADR was the second highest of the past 24 years while real RevPAR was the third highest.

As expected, weekday (Monday – Wednesday) occupancy fell 2.4ppts week over week (WoW) to 57.5% but was up 3.5ppts versus last year. Weekday occupancy in the Top 25 also saw a dip, with the level at 63.4% versus 67.4% a week prior. Seven of the Top 25 Markets reported weekday occupancy above 70%, led by Miami (79.8%) and including NYC, Las Vegas, and Orlando. Top 25 weekday occupancy was 7.6ppts higher than a year ago and 10ppts below the level seen in the comparable week of 2019.

The impact of last year’s Omicron surge is most evident in ADR, which was up $14 year over year. Most of the gain has come from weekdays in the Top 25 Markets with 43% of the industry’s year-on-year growth in that subset. Top 25 weekday ADR was up 16.4% YoY versus 8.8% for the remaining markets. Overall, 79% of the total year-over-year ADR growth came from Top 25 Markets where ADR was up 12.9% YoY versus 6.6% YoY in all other markets. ADR also increased by more than 20% YoY in seven of the Top 25 Markets, led by Washington, D.C. (+29.5%) and followed closely behind by Orlando (+28.7%) and San Francisco (+28.7%). Not surprising, nearly all markets (95%) had an ADR that was above the comparable week of 2019. Adjusting for inflation, only 41% of markets were above 2019. While the ADR trends remain positive, we are seeing a decrease in year-over-year growth rates, which we expect will continue as the Omicron calendar comps fade.

RevPAR is trending similarly to ADR with this week’s year-over-year increase (13.5%) the lowest of the past seven weeks. While the growth rate is slowing, 83% of markets are above their 2019 levels with 42% outperforming that year when accounting for inflation.

Global Performance

Occupancy (excluding the U.S.) continued to strengthen, reaching 64.5% (+16.1ppts YoY), which was the highest level of the past 21 weeks. ADR climbed to US$127, up 19.7% YoY and resulting in RevPAR of US$82, a gain of 59.4% YoY.  

Among the top 10 countries, based on supply, occupancy reached 66.1%, up 17.5 ppts YoY with an ADR of US$115 and RevPAR of US$76. The latter increased 57% as compared to last year. Among these countries, the United Kingdom saw the highest occupancy at 74.2%, which was the highest of the year thus far. More importantly, China saw its occupancy (68.5%) reach an 18-month high.

The Middle East had the highest occupancy of any subcontinent (76.3%), which advanced from 72.7% a week ago. The United Arab Emirates (85.6%) led the subcontinent with Saudi Arabia also seeing solid occupancy (76.6%). While the UAE had high occupancy, the level was down from a year ago as were ADR and RevPAR.

With resort travel gearing up, it no surprise that occupancy in the Caribbean continued to climb, increasing to 76.1%. Barbados led the region and also the world with occupancy of 87.2%. Aruba and Puerto Rico were not too far behind with occupancy levels above 80%. ADR was up 11.9% across the region but down by a similar amount in Barbados.

Final thoughts

The industry appears to have passed the first test of the 2023 leisure travel season in the U.S., with the Presidents’ Day holiday weekend producing year-over year increases and resort destinations continuing to strengthen. We are not alarmed by the decrease in the rate of growth across U.S. measures—this was expected. Further, we expect the rate of growth to continue to slow as we head toward summer in the Northern Hemisphere.  

Looking ahead

Occupancy and ADR will continue to see seasonal gains. In the U.S. we expect that RevPAR will grow about 5% WoW with occupancy approaching 65%. Further growth is also expected outside the U.S.