Market Recovery Monitor - 26 February 2022

The good news for the U.S. hotel industry continued as occupancy advanced to 62.2% during the week of 20-26 February 2022, up from 59.1% in the previous week. Room demand (23.9 million) and occupancy were the highest since the end of October. While weekend occupancy (70.6%) came down from its Presidents’ Day weekend level (73.7%), weekday (Sunday-Thursday) occupancy increased to 58.8% from 53.2% one week prior. While there is no doubt that weekday occupancy was supported by the Presidents’ Day holiday (Sunday & Monday), that’s not the full story as occupancy was even stronger Tuesday through Thursday at 61%. Average daily rate (ADR) also advanced again, up 2.2% week on week to US$144, which was the highest level ever if you exclude Christmas week 2021. Revenue per available room (RevPAR) increased 7.6% to US$89.45, which was the best level since late August.

Eleven STR-defined markets reached pandemic-era occupancy highs, nine of which were in Florida. Orlando, the nation’s second largest market based on supply, posted occupancy of 85.9%. In fact, this was only the 11th time that Orlando surpassed 85% in the past 165 weeks, and it was the market’s highest occupancy since the week ending 22 February 2020. The two non-Florida markets that reached pandemic-era highs were Phoenix and Inland Empire CA, which includes the cities of Palm Springs, Palm Desert, Ontario, and others east of Los Angeles. The highest weekly occupancy was again seen in the Florida Keys (94%) followed by Sarasota (93%), Fort Myers (93%), Tampa and Palm Beach, both at 90%. In total, fifteen markets reported occupancy above 80%, up from 8 the week before. Another 17 markets saw occupancy between 70% and 80%. Occupancy increased week on week in 85% of markets.

The Top 25 Markets also rebounded with aggregate occupancy for that group topping 65% for the first time since early August. This was only the seventh time since pandemic lockdowns began that Top 25 occupancy reached 65%. Eight of the Top 25 Markets saw occupancy surpass 70% during the week, including Los Angeles, San Diego, and Miami. Demand in Miami was helped by the South Beach Wine & Food Festival, which attracted 90,000 attendees.

San Francisco remained above 53% for a second consecutive week while Washington, DC also neared that level. New York City reached 61%, which was the market’s highest occupancy since the pre-Omicron scare. Markets categorized as central business districts (CBD) also advanced with occupancy of 57%, up more than two points from the previous week. Houston CBD showed the largest week-on-week gain as occupancy was up 18 percentage points, supported in part by the annual Houston Livestock Show and Rodeo, which will continue through 20 March. Chicago CBD and Tampa CBD followed with nearly eight percentage points of occupancy growth. Occupancy for hotels in urban locations increased to 58% with those in the Top 25 rising to 57%.

Group demand is also on the rise with a 15-week high, which was slightly more than half of the 2019 comparable. However, like with other measures, group demand has been increasing steadily since the beginning of the year. In the Top 25 Markets, group demand is now 55% of what it was in 2019, up from 50% two weeks ago. Among Luxury and Upper Upscale hotels in the Top 25, group demand increased to 60% of the 2019 comparable. Weekday group demand was lower than what it was in 2019 whereas weekend group demand was higher. Overall, occupancy for Upper Upscale hotels reached 61%, which was the highest such level since last summer.

ADR has risen for the past seven weeks with the measure up in nearly two thirds of all markets. Eighty percent of the 166 STR-defined markets reported higher ADR this week versus the comparable week of 2019. Adjusting for inflation, 48% of markets surpassed 2019 ADR levels, which was the highest weekly percentage since the Christmas holiday. ADR growth was the strongest among hotels in small metro/town properties (+4.6%) and in resorts (+3.8%), but fell in Suburban (-0.5%), Airport (-0.6%), and Urban (-1.5%) locations. ADR growth was also weaker in the Top 25 Markets (+0.5%) mostly because of a week-on-week decrease in Los Angeles (-18%) post-Super Bowl. Excluding Los Angeles, ADR in the remaining Top 25 Markets increased 2.8%. Los Angeles was not the only Top 25 Market to see a week-on-week decrease in ADR, as a similar change occurred in San Francisco, Denver, St. Louis, and nine other markets. By day type, weekday ADR was up 7.4%, while weekend ADR declined 4.9% in comparison with the previous period’s holiday weekend. Finally, we continue to see a rise in the number of hotels with an ADR above US$1,000. This week, 95 hotels were in that category, the third largest number of hotels with that level of ADR since 2019. The other two weeks with more hotels in that ADR category occurred in the last fortnight of 2021.

U.S. RevPAR has increased for the past seven weeks, which is the most since last summer. Industrywide RevPAR also surpassed the 2019 comparable by 8%. This was only the sixth time since the start of the pandemic that weekly RevPAR reached a level higher than in a comparable week from 2019. Absolute RevPAR remained the highest over the weekend in the Top 25 with the week’s figure topping US$126. But like with ADR, RevPAR fell from the previous weekend, dropping by more than 8% in the Top 25 with all other day types observing strong growth. On a market-level, 61% were at “Peak” RevPAR (RevPAR indexed to 2019 above 100). On an inflation-adjusted basis, 51% of markets were at “Peak.” Taking a longer view using a 28-day moving total, 49% of markets reported RevPAR above their 2019 comparable, but 19 markets remained in either “Recession” (RevPAR indexed to 2019 between 50 and 80) or “Depression” (RevPAR indexed to 2019 below 50).

Around the globe
Global occupancy, excluding the U.S., reached 51.6%, a 13-week high and the fourth consecutive week of growth. ADR was also up 2.4% with RevPAR increasing by 8.4%. The highest occupancy was again seen in the United Arab Emirates to 88.4%. Twelve of the 104 countries tracked on a weekly basis saw occupancy surpass 70%. Among those 12 were several Caribbean countries, including Puerto Rico, Aruba, and the Dominican Republic. Overall, occupancy in the Caribbean reached a pandemic-era high, topping 75%. RevPAR in the region has also increased by double-digit amounts in four of the past five weeks with growth of 17% in the latest week.

Among the top 10 countries, based on hotel supply, occupancy grew three percentage points to 52%, led by the United Kingdom’s 17-week high of 71.7%. All of the top 10 countries saw occupancy growth with all but two also seeing ADR gains. ADR in the top 10 was up 3.4% with RevPAR increasing 10.1%

The number of non-U.S. markets in “Depression” dropped to 34% using a 28-day moving average. A week earlier, 38% of markets were in that category. As a result, the percentage of markets in “Recession” increased from 37% to 40%.

Big Picture
Leisure demand continues to drive the industry as it has since the start of the pandemic. However, we are seeing solid signs, and hearing from clients, that business and group travel is making its long-awaited return. While rising gas prices and geopolitical tensions are of concern, the impact on travel should be limited. To put it into perspective, as of last week, gas prices were up US$0.98 per gallon year over year. For a typical car with a 12-gallon tank, the increase per week is under US$12, which equates to a yearly impact of US$624. While this is in combination with other rising prices, we don’t believe it will be a deterrent for travel. In past years, when gas prices have spiked, no noticeable change was seen in room demand. This time around, we suspect it will be even less as individuals rush to enjoy a sense of normalcy.