STR Weekly Insights: 5-11 February 2023

Countries included: United States, United Kingdom, Germany, China, Barbados, and United Arab Emirates

U.S. performance

The U.S. hotel industry saw accelerated growth, as predicted, with revenue per available room (RevPAR) gaining 8.5% week on week (WoW) to US$87. That RevPAR level was the highest of the past nine weeks and 18.9% higher than the corresponding week a year ago. The gain was also driven by a combination of higher occupancy and average daily rate (ADR), with the latter increasing 3.9% WoW to US$151 (+11.9% YoY). Occupancy reached 57.8%, which was also a nine-week high. While the RevPAR gain was almost exactly what we expected, its makeup was different as the occupancy gain was less than anticipated and ADR was larger.

The Top 25 Markets led the growth, accounting for 65% of the revenue gain from a week prior. To no surprise, Phoenix showed the largest impact of any of the major markets, accounting for 44% of the Top 25’s revenue growth as host of the Super Bowl and the MW Phoenix Open. Other large contributors included Orlando and New York City, which collectively accounted for more than a quarter of the week’s Top 25 revenue growth. ADR for the Top 25 increased 6.3% WoW to US$183. Occupancy was also stronger in the top markets, reaching 64.8%, up 3.1 percentage points (ppts) WoW versus 53.9% (+2ppts WoW) for all other markets. Excluding Phoenix, Top 25 occupancy was only marginally less, but ADR growth was significantly lower (+1.9% WoW) like all other markets (+1.6% WoW).

STR forecasted Phoenix RevPAR for the extended Super Bowl weekend (Friday-Sunday) to be US$419, up 186% WoW. With reporting complete for two of the three days, Phoenix RevPAR increased 202% WoW (141.5% YoY) to US$475 on ADR of US$541 (+148% WoW, 135.9% YoY)) and occupancy of 87.8% (+15.6ppts WoW, 2.1ppts YoY). Our forecast had called for lower ADR than what has been reported for the two days so far and higher occupancy at 94%. However, as compared to the last 10 Super Bowls, Phoenix’s 2-day occupancy was above the average (85.3%). ADR was the second highest but $21 less than the high seen in Miami’s 2020 Super Bowl. For the entire week, occupancy in Phoenix fell 2.7ppts YoY with sharp decreases seen Sunday-Thursday as business and group travel were mostly absent from the market due to the big game. Friday also showed a YoY decline but to a lesser extent.

At a property-level, 173 of the 399 reporting hotels in Phoenix experienced occupancy at or above 95% on Friday and Saturday with 72 completely sold out. In terms of ADR, 22 reported the measure at US$1,000 or more. Nighty-eight additional hotels had weekend ADR between US$500 and US$999.

While revenue growth was concentrated in a few U.S. cities, demand gains were widespread and topped 22 million for the first time since early December and was the second highest level for the comparable week since 2000. Double-digit week-on-week gains were seen in 25 markets, including Atlanta, Boston, Denver, NYC, New Orleans, and Washington, D.C. Most of this week’s demand growth (92%) came via weekdays (Sunday-Thursday). In many markets, the growth in weekdays was driven by increasing group room nights. In the Top 25 Markets, excluding Phoenix, 43% of this week’s weekday demand gain came from group.

For the full week, market occupancy ranged from 86.7% in the Florida Keys to 36.8% in the New Jersey Shore. The latter is not uncommon given the time of year and was up 0.8ppts from a year ago. The 10 highest occupancy markets were again dominated by Florida destinations. Daytona will be a leader in the next update with the Daytona 500 set for 19 February. Via Forward STAR, we see the market’s occupancy on the books at 90.3% on Saturday the 18th and in the upper 80s for the surrounding nights.

Global Performance

Occupancy outside the U.S. reached 61.4%, which was the highest level since early December with the measure 18.5ppts higher than a year ago. Occupancy stayed above 70% in Central & South Asia, the Middle East, and the Caribbean. Northern Europe, which includes the United Kingdom, rose to 70.5%, which was the first time it went over 70% in the past eight weeks. Global ADR (excluding the U.S.), however, was somewhat flat (US$123, +0.4% WoW) but up 19% YoY. RevPAR increased to US$75, up 70.5% from the same week last year.

ADR and RevPAR continued to be strong and at the highest level seen for the comparable week since weekly reporting began in 2000. Real ADR and RevPAR, however, were in the middle of the pack. While Phoenix was the clear leader in both ADR and RevPAR, two other markets, Atlanta and New Orleans, saw double-digit week-on-week gains in both measures. As compared to a year ago, more than half (56%) of all markets reported RevPAR growth of 10% or more with a quarter seeing gains of more than 20%.

Among the top 10 countries, based on supply, occupancy reached 62.2%, led by the United Kingdom where occupancy was 72.1%—the highest level of the year so far. Each of the 10 countries saw year-over-year growth of 11ppts or more this week with China and Germany seeing the largest growth (>25ppts).

Occupancy in China hit a 26-week high (65.2%) as Beijing, Shenzhen, Guangzhou and several others surpassed 70%. Shanghai reported occupancy of 65.5%, which was its highest level since early October. ADR in the country, however, was less responsive as it fell 2.5% YoY. Sharp year-over-year ADR decreases were seen in Sanya (-27.8%) and Hainan (-24.4%), but the most impactful market, given its size, was Beijing, where ADR fell 12.4%. On the flip side, ADR rose 52.6% in Hong Kong to US$145 with an occupancy of 68.7% (+23.9ppts), which was the market’s highest occupancy since August 2022.

Barbados (86.6%) and the United Arab Emirates (82.4%) continued to lead the world with the highest weekly occupancy.

Final thoughts

The hotel industry continues to ramp up as the year progresses. U.S. ADR has continued to surprise on the upside since the year began. January demand was in line with our forecast, but February is currently trending much stronger than anticipated. While most economic forecasts still call for a shallow recession in 2023, its impact to the hotel industry appears to be lessening based on the performance and attendance of recent big events. Only time will tell.

Looking ahead

For the week ending 18 February, U.S. and global performance will continue to see an uptick in demand and ADR. However, based on history, the rate of growth will slow with weekday occupancy and RevPAR flat to slightly up. The weekend, however, due to the Presidents’ Day holiday in the U.S., will carry the week with both occupancy and RevPAR sharply up.