U.S. Hotels – February 2022 Commentary

February 2022 Top-Line Metrics (percentage change from February 2019) 

• Occupancy: 56.9% (-8.2%)

• Average daily rate (ADR): US$137.39 (+6.8%)

• Revenue per available room (RevPAR): US$78.24 (-1.9%)

Key Points from the Month

• U.S. hotel RevPAR rebounded rapidly to just US$2.54 below the February 2019 comparable.

• While ADR recovery has been significantly influenced by inflationary pressures, rates on both a nominal and inflation-adjusted (real) basis are recovering faster than in prior downturns. Nominal ADR in February was 6.8% higher than comparable 2019 level, while real ADR came in 4.8% below the pre-pandemic rate.

• Group demand returned to Q3 2021 levels, while transient demand indexed to 2019 exceeded the prior high from December 2021. Transient demand continues to be heavily influenced by weekend leisure travel. 

• Top 25 Market ADR recovery varies substantially across markets with the division broadly aligned with major market drivers (e.g., business and leisure demand). 

Segmentation

After a lackluster January, group business growth shoots appeared as Omicron concerns receded and the recovery index returned to levels not seen since October 2021. Recent changes to COVID protocols in many urban markets should prove fruitful for group demand moving forward.

Transient demand growth reached pre-Omicron levels when indexed to 2019.

Leisure-based weekend demand continues to drive the transient recovery.

Top 25 Markets

Among the Top 25 Markets, Miami experienced the highest occupancy level (81.6%), which was still down 3.0% from the market’s 2019 benchmark.

Of note, Norfolk/Virginia Beach saw the only occupancy increase over 2019 (+3.0% to 52.1%).

Markets with the lowest occupancy for the month included Minneapolis (41.7%) and Chicago (43.8%).

San Francisco/San Mateo reported the steepest decline in occupancy when compared with 2019 (-40.5%).

The slower return of business travel and groups, and the lack of international inbound arrivals is evident across market performance with the best performers among the Top 25 being primarily leisure-driven—and the more corporate markets across the bottom.

While rates are broadly divided by the leisure vs. business markets, a lot of variability exist in ADRs across the Top 25 Markets.

Aggregated Top 25 Market ADR did broadly recover from Omicron with nominal ADR indexing at the highest of the COVID-era. Inflation continued to rise, so the real ADR index was four points below the high seen in 2021.

Top 25 Market ADR growth still trails all other markets by a wide margin, but recovery relative to the rate lost (gap) has occurred substantially faster in the major markets. In the last six months, Top 25 Markets have moved the ADR needle 13 points from -10% to +3%, while all other markets in aggregate increased just one point over the same period.

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