U.S. Market Recovery Monitor - 5 June 2021

Previous MRM versions: 22 May | 29 May

Week ending 5 June

For the week ending 5 June 2021, U.S. industry occupancy increased ever so slightly to 61.9%, up +0.2 points from the previous week. Room demand increased for a fifth straight week but by its smallest amount of the past four weeks. Supply was also on the rise as more hotels reopened ahead of the summer season. The increase in weekly supply (16,000 rooms) shaved off 0.1 points from weekly occupancy. As of 8 June, there were 402 hotels (96,000 rooms) still closed in the U.S. with 46% of all temporarily closed hotels in just three markets: New York, Orlando, and Chicago. On a total-room-inventory basis (TRI), which accounts for temporarily closed hotels, weekly occupancy was 59.2%, flat from the previous week.

Room demand increased in half of all markets during the week with Orlando recording the largest increase of any market, up 31,000 rooms week on week. Even with the increase, TRI occupancy in Orlando (53%) was well below its normal level when compared with the same week in 2019. Weekly market TRI occupancy ranged from 87% in the Florida Keys to 42% in San Francisco. The Florida Keys has led the nation in occupancy for nearly the entire year whereas San Francisco has been at the bottom since mid-February. Washington, D.C., New York, and Boston have also been constant companions to San Francisco for the lowest weekly occupancy each week.  

On a hotel-level basis, 61% of all participating hotels reported weekly occupancy above 60%, which was unchanged from a week ago. The percentage of hotels with a weekly occupancy below 30% also did not offer much change with 1,680 hotels in that category, which is 5% of all U.S. hotels. The largest numbers of hotels with a weekly occupancy under 30% last week were in Washington, D.C., Minneapolis, and Chicago, which accounted for approximately 10% of hotels in that category. That means that low performing hotels are scattered throughout the nation. While large hotels are more likely to see low occupancy due to the lack of groups and meetings, most of the hotels with an occupancy under 30% were small to medium sized. Overall, large hotels had a weekly occupancy of 49% during the week, up slightly from the previous week. Small hotels continued to see strong occupancy at 65% last week.

Weekend (Friday & Saturday) TRI occupancy was 71%, which, as expected, was lower than the Memorial Day weekend level (75%). Weekday TRI occupancy (55%) increased in the week boosted by the Sunday of the Memorial Day holiday, making the weekday level among the highest since the start of the of the pandemic. Occupancy was lower every day of the week except on Sunday and Thursday.

U.S. ADR improved for a seventh consecutive week, led by markets outside the Top 25. Weekday ADR led the gain due to strong growth on the Sunday of the Memorial Day holiday. Weekend ADR decreased (-7.1%) for the first time in seven weeks. Overall, 40% of markets and 48% of hotels reported a decline in weekly ADR.

The U.S. industry remained in “recession” as weekly RevPAR indexed to the same week in 2019 was 77, meaning RevPAR was 77% of the 2019 level, the highest level of the past 65 weeks. Some of the increase is due to the shift of the Memorial Day holiday. While the index has been affected by the holiday shift over the past two weeks, it’s important to recognize that even when adjusted for the shift, the index has risen in each of the past six weeks via leisure demand. On a 28-day moving average, 64% of markets were categorized as being in “recovery” or “peak” as those markets had RevPAR indexed to the same 28-days in 2019 above 80. There were still nine markets in “depression” where RevPAR indexed to 2019 was below 50, including San Francisco, Washington, D.C., New York, and Boston.

Outside the U.S., industry performance persisted to be very weak but with similar signs of pent-up demand held back by pandemic-led travel restrictions. The U.K. is a notable exception with TRI occupancy rising to 55% in the past week with surging domestic tourism and the half-term school holiday. Thirteen of the 39 U.K. markets reported weekly TRI occupancy above 70%, and all but five markets were above 50%. The market recovery monitor outside the U.S. placed most markets (77%) in the “depression” category as RevPAR indexed to 2019 remained well under 50.

It is encouraging to see demand build week after week, but our outlook remains cautious as restrained business travel along with increasing labor issues and costs are placing additional pressure on operators. Managing guest expectations during this period is key as it sets the foundation for the industry’s full recovery in the months/years to come. Looking ahead, we anticipate that leisure demand will edge forward over the next two months before abating in the fall. Business demand is then expected to begin its advancement as offices reopen. That volume will be more of an increasing trickle versus what we have observed with leisure demand. That is why we believe the industry’s full recovery will take years versus months.

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.