STR Weekly Insights: 27 August – 2 September 2023

Countries included: United States, Canada, China, El Salvador, Estonia, France, Germany, Indonesia, Italy, Japan, Kenya, Mexico, Spain, Sri Lanka, and United Kingdom

Analysis by Chris Klauda and Isaac Collazo

U.S. Performance

Entering the first days of September, U.S. hotel occupancy (62.7%) was nearly identical to the same week last year (62.6%) and in line with our expectations. The measure was 3.7 percentage points (ppts) lower than the 2019 comparable, but the difference between the two was less than the previous four weeks, when the differential averaged 5.2ppts. Revenue per available room (RevPAR) increased 2.0% year over year (YoY) to US$94, driven by a 1.8% increase in average daily rate (ADR) to US$151. This was the third week of ADR gains below 2%, which we attribute to changing mix and rebalancing of demand. Real (inflation-adjusted) ADR remained just under the 2019 level.

Weekday (Monday – Wednesday) occupancy continued to drive performance and showed the largest year-over-year gain of the past nine weeks (+1.5ppts). This gain was dominated by the Top 25 Markets, which grew 3ppts while the remaining markets increased 0.7ppts. Weekdays also produced stronger ADR and RevPAR gains among the Top 25 Markets with ADR up 4.5% and RevPAR up 9.7%. Outside the Top 25, ADR increased 2.8% with RevPAR growing 4%. We believe the growth on weekdays points to increasing momentum in business travel across markets of all sizes with the Top 25 Markets the primary benefactors.

Shoulder days (Sunday and Thursday) showed modest gains in the Top 25 Markets with occupancy up 0.6ppts YoY, which combined with ADR up 1.2%, produced RevPAR growth of 2.3%. Weekend occupancy was down slightly (-0.3ppts) while ADR grew 1.2%, pushing RevPAR growth of 0.6%. In all markets, shoulders and weekends netted RevPAR declines because of falling occupancy. 

New York City (86.2%) edged out the Alaska market (86%) for the nation’s highest occupancy following Alaska’s four-week run in the top spot. Boston was the only other market breaking the 80% occupancy threshold. Weekday occupancy was also over 80% in the three markets and in San Francisco (80.1%). In addition to the weekday, New York also received a significant weekend boost with occupancy of 93.8%, lifted in part by the White Label World Expo (August 30-31) and the start of the U.S. Open.

Of all the Top 25 Markets, Minneapolis and Las Vegas saw the largest YoY RevPAR increases (+26.7% and +26.3%, respectively). Both markets experienced dramatic increases in group business. Additionally, Minneapolis’s growth was led by strong weekend occupancy (85.5%) and a weekend ADR increase of 9.7%, impacted by the Minnesota State Fair, which is the second largest state fair in the country (behind Texas). Las Vegas reported strong ADR across the entire week with the metric growing 16.5% on weekdays, 12.8% on the shoulder days, and 6.9% on the weekend. Across the three Top 25 Florida markets threatened by Hurricane Idalia (Orlando, Miami, and Tampa), only Tampa saw significant week-over-week changes in performance with occupancy dropping 8.4ppts from the prior week and producing the market’s lowest occupancy (53.7%) of the year so far. Melbourne (-19.2ppts) and Daytona Beach (-8.6ppts) also saw significant decreases due to the hurricane.

Higher-end hotels have dominated performance gains over the summer. Over the past four weeks, hotels in the Upper Upscale and Upscale chain scales increased RevPAR at twice the industry rate (+4.0% and +3.9%, respectively). For Upper Upscale, occupancy (+2.2ppts) drove the gains as ADR was relatively flat (+0.7%). Upscale performance was led equally by occupancy (+1.3ppts) and ADR (+2.0%). Among the remaining chain scales, Upper Midscale posted solid ADR gains (+1.9%) amid flat occupancy (-0.1ppts). Luxury’s continued to see falling ADR (-2.8%) but rising occupancy (+1.1ppts). Midscale and Economy chain scales posted declining RevPAR (-1.0% and -2.9%, respectively) due to falling occupancy.

Group demand among Luxury and Upper Upscale hotels increased 1.7% compared to the same week last year. Over the past six weeks, group demand has average gains of 2.1% compared to the same six weeks last year. With group demand trending in a positive direction, and if historical patterns are followed, we expect to see a slight week-over-week increase next week followed by strong growth up until the end of year holidays.

Global Performance

Following typical seasonal patterns as the summer holidays end in the Northern hemisphere and school begins, global occupancy (excluding the U.S.) softened considerably to 64.3%, down 6.6ppts week over week. However, occupancy continued to show good, year-over-year growth (+4.1ppts). ADR increased 12.5% to US$144, resulting in a 20.2% gain in RevPAR to US$94.

Occupancy for the top 10 countries, based on supply, performed like the rest of the globe with the metric rising 5.1ppts YoY but falling week over week (-7.3ppts) to 66.1%. Top 10 ADR rose 8.7% YoY to US$133, and RevPAR increased 17.7% YoY to US$88.

Of the top 10 countries, the United Kingdom had the top occupancy (77.9%), up 2.3ppts year over year but down 2.9ppts week on week, impacted by the annual bank holiday. Canada posted the second highest occupancy (75.1%), up 2.3ppts YoY. Asian countries (Japan, Indonesia, and China) saw the largest occupancy growth this week (7+ppts each) with each seeing strong RevPAR gains as well (30%+ YoY).

Outside of the top 10, the highest occupancy gainers in each region were:

• Guatemala was up 12.7ppts with occupancy at 71.8%. Jamaica led the Americas in actual occupancy at 75.6%.
• In Asia Pacific, Sri Lanka led for a second consecutive week with a gain of 22.1ppts YoY even though occupancy remained rather low (46.1%). Fiji had the continent’s highest occupancy (82.8%).
• Denmark saw the highest occupancy increase in Europe, up 23.8ppts to 82.9%. Ireland, however, had the highest occupancy (86.7%) in the region.
• In the Middle East and Africa, Botswana saw a 34.8ppts YoY increase to 72.1%, and Kenya posted another strong week with occupancy up 20.4ppts. Botswana also had the region’s highest occupancy overall.

Final thoughts

Summer has come to end (unofficially), and the hotel industry appears to be well positioned for the fall season with group events strengthening and business travel returning based on strong weekday trends. Additionally, news from hotels, airlines, booking companies and destinations remains positive for the fall, and recession fears fading somewhat bolsters our confidence for the remainder of the year.

Looking ahead

Next week’s performance analysis will contain weekday weakness from the Labor Day holiday. Thereafter, based on forward bookings data, we expect occupancy to strengthen to near 70% as groups and meetings return along with increasing business travel. Global occupancy will see softness as compared to summer peaks, but year over year gains are expected to continue.