U.S. Market Recovery Monitor - 4 September 2021

Previous MRM versions: 21 August | 28 August

Week ending 4 September

After falling for the past five weeks, occupancy bounced back as Labor Day leisure travel and Hurricane Ida-related demand drove a level of 61.3% during 29 August-4 September. Weekend occupancy (Friday and Saturday) increased to 77%, which was the country’s highest since the first week of August. When compared with Labor Day weekend 2019, which was a week earlier that year, occupancy was nearly the same, indicating the desire to travel remains strong despite the increase in COVID cases, and the declines seen over the past several weeks are more due to the return of in-person schools and the slow materialization of business and group travel. On a total-room-inventory basis (TRI), which accounts for temporarily closed hotels, weekly occupancy was 58.8%.

Labor Day weekend demand increased the most in Texas, followed by Florida and California. In total, all but eight states reported demand gains during the weekend with total U.S. demand two percent higher during the first two days of this year’s Labor Day weekend than in 2019. While the weekend was strong, weekday demand fell for a sixth consecutive week, this time by more than 4% week over week. This is normal ahead of a holiday weekend. In 2019, weekday demand ahead of the Labor Day holiday fell by more than eight percent. The difference between that year and today is Hurricane Ida, which raised demand in gulf coast locations during the week, mitigating the pre-holiday drop.

While most markets (83%) saw weekday demand fall, clean up and evacuation from Hurricane Ida bolstered demand and occupancy in 10 markets. Mobile, Jackson, MS, and Louisiana North all reported weekday TRI occupancy levels above 75%. Strong weekday occupancy was also seen in the Florida Panhandle, Alabama South, Mississippi, Houston, Texas East, Louisiana South, and Birmingham, where weekday TRI occupancy was in the mid-60% and up. Seven of the 10 Hurricane Ida-impacted markets saw weekday occupancy increase by more than 20 percentage points week on week.

Leisure and football destinations did the best during the weekend, led by Colorado Springs, which saw weekend TRI occupancy top 93%. On the opposite end, New Orleans, which had been banking on a strong Labor Day holiday prior to Hurricane Ida, saw the lowest weekend TRI occupancy at 40%. Overall, 69% of all markets saw TRI occupancy at 70% or better during the weekend, which was the most of the past three weeks.

Most hotels also benefited from the last summer holiday with 84% reporting weekend occupancy above 60%. Nearly one-third of U.S. hotels saw strong occupancy (above 90%) during the weekend, the most of the past four weeks. For the week, 59% of hotels reported occupancy above 60%.

Average daily rate (ADR) continued to stand out. During the first two days of the Labor Day weekend, room rates increased 6.8% week on week. As compared with the same two days of the 2019 Labor Day weekend, this year’s rates were 15% higher. On an inflation-adjusted basis (real), ADR was 9% higher on Friday and Saturday. More than a third of all markets reported double-digit weekend-to-weekend ADR growth. However, weekday ADR dropped 4.5%, which is the largest decrease of the past five weeks. With the decrease in weekday ADR, total week ADR was up 0.4% from the previous seven days with nearly half of all markets reporting lower ADR.

After falling in the previous five weeks, TRI revenue per available room (RevPAR) advanced 0.3% week on week and was 93% of what it was during the same Labor Day week in 2019. Weekend TRI RevPAR increased 16% week on week and was 11% higher than the Friday and Saturday of the 2019 Labor Day weekend. On a 28-day moving average, used to smooth out holiday shifts, 70% of all markets were at “Peak” (TRI RevPAR higher than 2019). Only one market, San Francisco, was in “Depression” as its TRI RevPAR was less than half of what it was in 2019.

Global TRI occupancy, excluding the U.S., continued to see downward pressure, falling to 38% this week based on data from 104 countries. China saw another week of improvement, but occupancy remained low at 36%. The U.K., Canada and Germany saw demand slow, resulting in a four-percentage point drop in occupancy versus the previous week. Of the 10 largest countries, based on supply, the U.K. had the highest weekly TRI occupancy at 64% with Canada coming in second at 59%. With the decrease in occupancy, the percentage of non-U.S. markets in “Depression” remained high.

Big picture
With the summer officially over, demand will continue to shift downward, especially during the weekdays. The next two reporting weeks will also be impacted by Rosh Hashanah and Yom Kippur. Thereafter, demand should stabilize, albeit at a lower level than what was seen during summer. The wild card is conferences. Based on news reports, some have been postponed or moved to a virtual platform, but not all of them. The weeks before the holidays are all dependent on some level of recovery in business and group travel.

About the MRM
When the U.S. hotel industry reached the one-year anniversary of the earliest COVID-19 impact, year-over-year percentage changes became less actionable when analyzing performance recovery. Thus, STR introduced a weekly Market Recovery Monitor that categorizes each STR-defined market based on an indexed comparison with the same time periods in 2019. An index is simply a ratio that divides current performance by the benchmark (2019 data).

For example, during the week ending 6 March 2021, U.S. RevPAR was $48.13. In the comparable week from 2019, RevPAR was $87.75. This produces an index of 54.8 ($48.13/$87.75*100), meaning RevPAR was slightly more than half of what it was in 2019.

We use an index to place each market in one of four categories: depression (index <50), recession (index between 50 and 79.9), recovery (index between 80 and 99.9), and peak (index >=100). Additionally, we highlight other top market performances that contribute to higher levels of recovery across the U.S.