Market Recovery Monitor - 17 December 2022

Note: The Market Recovery Monitor will be off for the holidays during the final week of December. The next and final edition of the MRM is scheduled to run on 6 January. Beginning 13 January, the MRM will be replaced by a new series, “STR Weekly Insights.”

Methodology update: This will be one of the final weekly analyses to utilize STR’s current non-participant modeling methodology and U.S. Top 25 Markets. In 2023, Las Vegas will replace Norfolk/Virginia Beach in the Top 25. Read more HERE.

Key Takeaways:

• U.S. occupancy began the normal pre-holiday decline
• Skiing areas posted the highest ADR increases in the U.S.
• Nigeria, India, Aruba and Qatar led in occupancy globally.
• Mumbai and Hyderabad in India led markets globally in occupancy.

As we get closer to the holidays, hotel occupancy begins to slow, and this year was no exception. U.S. occupancy for the week of 11-17 December fell to 54.5% from 59.6% in the prior week. The decrease fell in line with expectations based on prior years. All days of the week saw a week-over-week (WoW) decrease with Tuesday through Thursday seeing the largest declines at -6.5 percentage points (ppts) and the remainder of days dropping by an average of 4ppts.

Nominal average daily rate (ADR) declined 6.8% WoW to US$135, up 10.3% from a year ago and +24% versus 2019. Nominal revenue per available room (RevPAR) fell 14.7% WoW to US$74, which was 12% higher than in 2021 and 35% greater than 2019. Real ADR and RevPAR were above 2019, something not seen over the previous two weeks. All performance numbers are elevated versus 2019 as week 51 of that year had more of the Christmas impact than this year.

Despite the seasonal slowing, demand for the week was strong and the highest for the 51st week of the past 23 years with demand reaching 21.1 million, up from 20.7 million a year ago. For the first time this year and since the start of the pandemic, weekly occupancy was also at its highest level for this specific week since weekly reporting began. The previous high was seen in 2016 (54.2%) with last year’s level at 53.7%.

Remember, 2022 is somewhat special as it has 53 full weeks versus 52 and less of a Christmas impact. This year is most like 2005 and 2011 in terms of years with the same starting weekday and equal number of days. For comparison, 2019 had 52 full weeks. More than a third of markets reported their highest room demand for week 51 since the start of weekly reporting with nearly a quarter of markets also seeing their highest occupancy for week 51.

New York City had the highest weekly occupancy again this week (82.9%). Of the 10 highest occupancy markets this week, six were in Florida led by Fort Myers, which continued see elevated demand post-Hurricane Ian, as well as Palm Beach and Fort Lauderdale. Oahu, Fort Worth/Arlington and Phoenix completed the remainder of the high occupancy markets for the week. Overall, 34 of the 166 STR-defined U.S. markets showed weekly occupancy above 60%.

With the year winding down, weekdays (Monday – Wednesday) saw a sharp occupancy decline with the Top 25 Markets falling 7.5ppts WoW but up 6.4ppts from a year ago. Given the shift in the calendar, Top 25 Market occupancy was well above 2019 for only the sixth time since the start of the pandemic with five of the six occurrences happening this year. That was in part due to the calendar differences between the two years.

New York City led the Top 25 Markets in weekday occupancy (81.7%) as well and was second among all markets behind Fort Myers. Phoenix was the only other Top 25 Market to surpass 70% in weekday occupancy as most were in the 60s. Despite the lower absolute level, most Top 25 Markets had higher occupancy as compared to 2019 given the calendar shift.

Nationwide weekend occupancy (Friday & Saturday) fell 4ppts WoW and was down 1.6ppts year over year (YoY) but up strongly against 2019. New York City reported the nation’s highest weekend occupancy (89.5%), which equaled the level seen in 2019. New York was followed by Gatlinburg/Pigeon Forge, Fort Myers, and Jacksonville, where weekend occupancy was above 80%. Orlando, the nation’s second largest market, also saw solid weekend occupancy at 76.6%, down -1ppts versus a year ago.

Chain scale occupancy ranged from 61.4% in Upscale to 47.3% in Midscale. Both Luxury and Upper Upscale were above 58% for the week. Looking back over time, occupancy in Upper Midscale, Midscale and Economy was the second highest behind 2021. The remaining segments saw occupancy among the five highest ever for the week.

Nominal ADR increased the most week over week in skiing areas including the broad markets of Utah Area (+20.3%), Colorado Area (18.3%) and Wyoming (13.6%). As compared with 2021, ADR was down more than 3.5% in the final two of that group but up in Utah Area. Eighty percent of all markets saw week-over-week ADR decrease, however, 92% reported year-over-year growth and nearly every market had ADR above 2019. Real ADR was above 2019 in 72% of all markets.

Nominal ADR fell the most on weekdays (-7.8% WoW) and the least on the weekend (-5.7% WoW). As compared with last year, ADR was up the most on weekdays (13.6% YoY) and on shoulder days (Sunday & Thursday), when it increased 10.3% YoY. Fort Myers saw the largest year-over-year weekday ADR increase (51%) followed by Washington, D.C. (45.6%). The majority of the Top 25 Markets reported year-over-year weekday ADR gains of greater than 10% with seven seeing 20%+ gains, including New York City, New Orleans, San Francisco, and Seattle. Real weekday ADR was also above 2019 for most the Top 25 Markets.

Nominal RevPAR was also up the most in Colorado Area (24%) and Utah Area (22%), but both markets were down compared to 2021. With occupancy and ADR mostly down, it’s not surprising that 88% of markets saw RevPAR fall week over week. And like the other two metrics, RevPAR was up year over year with nearly every market above 2019 and most markets with real RevPAR above 2019.

Over the past 28 days, 55% of markets had real RevPAR above 2019 with 42% in STR’s “Recovery” category as real RevPAR was between 80% and 100% of 2019. Only four markets—San Jose, San Francisco, Oakland and the New Jersey Shore—were in the “Recession” category with real RevPAR between 50% and 80% of 2019.

Around the Globe 

Occupancy outside the U.S. fell 2.2ppts WoW to 59.6%, which was 11ppts better than a year ago. More than two thirds of the 103 countries monitored on a weekly basis saw a week-over-week decrease. Five of the 10 largest countries, based on supply, saw occupancy slip by more than 5ppts WoW. The United Kingdom (-8.7ppts WoW) reported the steepest decline among the group. Of course, each of the 10 countries is doing much better a year ago with occupancy up by nearly 10ppts. Nominal ADR fell 2.2% WoW to US$127, which was 25% better than a year ago and compared to 2019. At US$75, nominal RevPAR was down 5.7% versus a week ago but 53% higher than a year ago. As compared to 2019, RevPAR was up 23%.

Nigeria saw the world’s occupancy this week (80.3%) followed India, Aruba and Qatar, which all had occupancy above 75%. Overall, 45% of countries had occupancy above 60% this week with the lowest occupancy seen in Cambodia (26%). China (51%) had the lowest occupancy of the top 10 countries, up more than a point from a year ago and down 14ppts as compared to 2019.

Central & South Asia saw the highest occupancy of any subcontinent (75.0%), which was 4.2ppts ahead of 2019 levels. This indicates the start of high season in the region. Northern Europe saw an 8.5ppt WoW drop in occupancy to 70.3%. Despite this decline, the region maintained the second highest occupancy level of all subcontinents and was up 6.9ppts versus the comparable week in 2019. At US$103, nominal ADR was 47% ahead of 2019 levels.  

Among markets, two in India (Mumbai and Hyderabad) led with occupancy above 86% and followed closely by Kalimantan, Indonesia. Auvergne-Rhone-Alps saw the largest week-on-week growth in nominal ADR (+35%) followed by Switzerland Southwest (+24% WoW).

Over the past 28 days, 211 (61%) of non-U.S. markets had real RevPAR above 2019. This was the most of any week since we began tracking real RevPAR recovery. The number of countries in the “peak” category has been rising since late September. Fifty-seven markets were still in “Recession” and six were in “Depression” as real RevPAR was less than 50% of the 2019 level.

Big Picture

While we thought we might see a rise in occupancy this week, there wasn’t much of a disappointment given historical trends—optimism replaced what the data was showing us. Using just data based on past performance, the next three weeks will be a roller coaster as week 52 will see a large week-on-week decline in demand (~-24%) followed by a moderate increase (~+15%) in week 53 to end the year. Demand in week 1 (1-7 January 2023) is predicted to fall steeply before rising again in week 2. These are all normal seasonal patterns for the industry.