U.S. Hotels – April 2022 Commentary

9 June 2022

Data Insights Blog

April 2022 Top-Line Metrics (percentage change from April 2019):

Occupancy: 65.5% (-3.3%)
Average daily rate (ADR): US$149.90 (+14.0%)
Revenue per available room (RevPAR): US$98.20 (+10.2%)

April 2022 Profitability Levels:

GOPPAR: US$90.96
TRevPAR: US$218.40
EBITDA PAR: US$68.37
LPAR (Labor Costs): US$64.22

Key points from the month:

April RevPAR was 10% higher than the 2019 comp, driven by ADR and strong demand
Demand came in 240k room nights below pre-pandemic levels, which was the best such margin of the pandemic-era
ADR increased 14% with the first real (inflation-adjusted) ADR growth (+0.7%) of the pandemic-era
Group demand indexed at nearly 90% of pre-pandemic levels with more than 7.2 million rooms sold
GOPPAR, TrevPAR and EBITDA PAR were the highest since November 2019.
Markets outside of the Top 25 reported RevPAR that was 17% above 2019 levels
Top 25 Market RevPAR eclipsed the pre-pandemic comparable for the first time since COVID began
Rooms under construction continued to decline, and with rising interest rates, that trend is unlikely to change

Top 25 Markets

Top 25 Markets broke the recovery barrier with RevPAR (US$125) roughly US$2 over 2019 levels.

Unsurprisingly, ADR drove that recovery: At US$177, April 2022 ADR was the highest rate ever recorded for the Top 25 Markets.

However, market-level Top 25 occupancy is closing in for the majority of markets. Four key outliers still have occupancy levels >10 points below pre-pandemic levels, but the other 21 markets averaged occupancy only 4 points off April 2019.

The markets with the biggest gaps are explained by COVID restrictions and precautions (San Francisco), reliance on government travel (D.C.), and relatively poor April weather compared with other major metros (i.e. Minneapolis, Chicago). All four of these markets are also business and/or group-reliant, meaning that there is less leisure base to offset the slow rebuild of the corporate segments.

Nine of the major markets realized GOPPAR and TrevPAR levels higher than 2019 comparables.

Pipeline

Volume in the in construction and final planning phases continues to fall while planning phase rooms continue to grow (for now). Overall, rooms under contract are down 6% from last year.

In construction rooms are down 67k compared to the prior peak in April 2020, but relative to development trends post-Great Recession, there is a flatter slope to the decline.

This could mean that development picks back up much sooner (it took almost four years for in construction rooms to reach rock bottom post-2008), but the recent increase in interest rates might derail construction.

Following the Great Recession, the Federal Reserve held interest rates at the zero-lower bound (i.e., as low as they could possibly be) for six years to promote economic growth. Thus far in 2022, we have had two hikes, with the second a full 50bp (the biggest single-meeting hike since 2000), and several more 50pt hikes signaled for this year.

That means loans will become more expensive, which will likely dampen future development trends and means that in construction trends might flatten in the short-term only to dip sharply down the line.

Latest Weekly Data

Weekly data through Memorial Day Weekend came in lower than expected, as U.S. hotel occupancy fell to 66.5% from 68.6% the prior week. The decrease was the largest for the week ahead of the holiday since STR began publishing weekly data in 2000. However, Memorial Day Weekend demand was the highest on record. Read more in our latest Market Recovery Monitor.

Latest Forecast

STR and Tourism Economics upgraded the recovery timeline for U.S. RevPAR. On a nominal basis, the metric is now expected to surpass 2019 levels in 2022. Read more here.