STR Weekly Insights: 23-29 April 2023

Countries included: United States, United Kingdom, Spain, Germany, Italy, China, Mexico, France, Canada, Japan, Indonesia, Ireland, Belgium, Austria, Singapore, United Arab Emirates

U.S. Performance

U.S. hotel industry occupancy slipped 0.5 percentage points (ppts) from the prior week to 66.6% in the period ending 29 April. Despite the small, seasonal decline, the week still produced this year’s third best occupancy level thus far. One added long-term indicator is that total room demand (almost 26 million room nights sold) was the highest ever for the particular week, just edging out the 2019 comparable by 30,000 rooms.

Weekly occupancy grew a modest 0.1 percentage points from the matching week in 2022. Unlike the previous two weeks, comparisons were “clean” with no Easter calendar shift impacts.

Average daily rate (ADR) held steady at US$156, the same as prior week. ADRs have remained in the mid-US$150s for the last six weeks with little weekly fluctuation since the peak in mid-March at US$166. On an annual basis, ADR grew 5.4% year over year (YoY). That was just ahead of the pace of the most recent CPI-indexed annual inflation rate (5.0%) and an improvement from the 4.7% YoY gain reported two weeks ago. Real ADR (inflation-adjusted) was 1.4% higher than the 2019 comp and remains in real growth territory.

With slightly weaker occupancy, revenue per available room (RevPAR) fell US$1 week over week (WoW) to US$104. This minor decline is on par with historic seasonal patterns, and we expect more variable weekly performance with some slower weeks headed into the Memorial Day holiday. U.S. RevPAR gained 5.5% YoY, again a pace slightly ahead of annual inflation. The week’s real RevPAR indexed 1.6% below the 2019 weekly comparable (US$106 in today’s dollars).

Day-of-week patterns showed small but consistent softening in occupancy across most days. Weekend occupancy (Friday & Saturday) fell to 74.3%, a one percentage point decrease WoW, with weekdays (66.3%, Monday-Wednesday) and shoulder days (59.5%, Sunday and Thursday) declining 0.4ppts and 0.1ppts, respectively. A longer-term comparison to the 2022 weekly comp shows that weekends, which are dominated by leisure travel, may have lost some of last years’ early recover momentum (-2.2 ppts from 76.5%) while recent weekdays have nearly offset with YoY gains (+1.8 ppts from 64.5%).

Top 25 Performance

The U.S. Top 25 Markets finished the week at 73.7% occupancy (-0.4 ppts WoW), which was third best level this year and a solid gain from 71.8% last year. A similar seasonally weekly decline pattern also applied to markets outside of the Top 25 (-0.5 ppts WoW to 62.8%). Unlike the Top 25, however, these (non-top 25) markets reported a decline in occupancy (-0.9ppts) year over year.

Top 25 ADR remained unchanged from the prior week at US$189, with all other markets averaging US$135 (also unchanged). RevPAR fell one dollar WoW in both the Top 25 Markets (US$139) and markets outside of the Top 25 (US$85).

Of note, annual growth rates in ADR provide one of the sharper distinctions between the Top 25 Markets and non-Top 25 destinations with 9.3% ADR growth in Top 25 vs. 2.4% growth in all other markets. The latter turns to decrease after factoring for inflation. One key difference is that many smaller markets had already achieved or at least came close to pricing-peaks by this time last year due to strong leisure demand. Meanwhile, many larger markets for this period were just starting to gain demand (and pricing power) through both a partial return of corporate travel but also some shifting leisure patterns.

For the fourth consecutive week, New York City led the Top 25 Markets in occupancy at 87.8% (+5.8 ppts WoW), followed by Las Vegas (81.5%, +0.9 ppt) and San Francisco (81.1%, +14.5 ppts). San Francisco, buoyed by the RSA Conference, led the major metros in YoY growth.

NYC was among a set of large markets that matched their 2019 weekly occupancy. Others large markets matching (or bettering) 2019 included Phoenix (100 occupancy index), Houston (101), Washington, D.C. (103) Dallas (105) and Nashville (106). In a pandemic-era first, every Top 25 Market’s weekly occupancy indexed at 90 or better against 2019, meaning they were all within a 10% margin (or better). In fact, it was a relatively good occupancy week across all 167 STR-defined markets with only 23 markets (14%) indexing below 90 of 2019 comparables.

Again thanks to the large technology conference (RSA Conference), San Francisco posted weekday (Monday-Wednesday) occupancy at 92.3%. Additional compelling weekday market occupancies came in in New York (89.3%), Washington, D.C. (82.0%), Boston (81.1%) and Nashville (80.0%). In fact, six of the best 10 weekday markets in the U.S. occurred within the Top 25 set. Select large markets also continue to draw enviable leisure demand as indicated through their weekend (Friday-Saturday) occupancy. For this most recent week, three of the 10 best weekend markets came from the Top 25, including New York City (91.1%), Las Vegas (88.6%) and Nashville (85.1%).

Group and Transient Patterns

Group bookings continued on a weekly growth trajectory (+0.5% WoW) and reached the third highest level in the pandemic-era. Specifically, group demand came in at 2.23 million room nights among luxury and upper upscale hotels. The week was just about 50,000 weekly rooms short of top group weeks from last fall (weeks ending 24 September and 22 October). Group booking increased 5.2% YoY. Transient bookings showed some expected seasonal slowing, dropping 0.7% WoW to 3.67 million rooms. From a year ago, weekly transient demand had gained 4.9%

Weekday group demand within Top 25 Markets showed WoW demand increases both on weekdays (+1%) and shoulder days (+2.7%). Group demand within Top 25 Markets grew 5.9% YoY compared to 4.8% for remaining markets. Increasingly large markets are gaining a bigger share of group bookings as convention travel returns to normalcy.

There are normal seasonal fluctuations with group bookings, and market-level group results can be extraordinarily volatile. For example, most of the Top 25’s group demand lift this week stemmed from a single major tech convention in San Francisco. Excluding that market, Top 25 weekday group demand would be 3.4% less. Likewise, Las Vegas had a slower weekday group schedule, and without that market, the Top 25’s weekday group demand would have increased 4.1%.

Global Performance

Global occupancy, excluding the U.S., reached 70.1%, up 2.6ppts from the previous week and almost 15ppts ahead of last year. The week’s level was the highest since the start of the pandemic. Weekly ADR rose 14.9% YoY to US$141, resulting in a RevPAR (US$99) increase of more than 50% from last year.

Among the top 10 countries based on supply, occupancy was 71.7%, which was also highest level since the start of the pandemic and up 16ppts YoY. Several holidays across the globe took place, including Eid al-Fitr and the May Day holiday, which may have provided a boost to the preceding weekend. The U.K. had the highest occupancy among the top 10 at 83.1% and was followed by Spain (76.4%). The largest year-over-year occupancy gain was seen in China (+27ppts), where occupancy topped 70.6% but was down from its pandemic-era high two weeks ago (74.2%). Indonesia also experienced a large year-over year gain.

Outside the 10 largest supply countries, a diverse set of countries posted occupancy above 80%, including Ireland, Belgium, Austria, Singapore, and the UAE – all impacted by one of the above-mentioned holidays.

Final thoughts

On balance, this was a solid week for U.S. hotel performance. There was some seasonal slowing that is typical of years with a later Easter as many leisure travelers seem to have already taken their spring trips. Business/corporate travel continues to ramp-up as we see continuing gains in weekday occupancy, particularly in the largest markets. Likewise, the overall mix of travel appears to continue shifting away from leisure/rural and more toward business/city. Larger conventions and group bookings continue to have greater impact on a broader range of major markets.

This was one of the best weeks in 2023 across the globe. Leisure travel remained stable, and group and transient business travel are improving. The Top 25 Markets continue to show strong performance while all other markets are normalizing. ADR remains firmly grounded with positive annual gains although the rate of ADR and RevPAR growth is moderating and will continue to do so.

Looking ahead

Performance next week is expected show a modest seasonal decline as we hit an interim period between spring and the post-Memorial Day summer kickoff. College graduations are coming up and should add some family travel, but this is expected to be offset by lessened leisure travel until families are freed from school calendars. As we move closer to the summer season, leisure travel will strengthen, and group will moderate. Business transient travel is expected to continue improving. Global performance will also continue pacing upward.