The Friday and Saturday of Labor Day weekend produced an all-time demand record for those two days. The previous high came last year. For the entire week (28 August-3 September 2022), room demand continued to trend down, falling 3.3% week on week (WoW). That decline, however, was less than the average of -4.8% seen in previous years for the period that included Labor Day weekend. Weekly occupancy dropped to 62.8%, -2.1% WoW, but was +1.7% higher than a year ago. Nominal average daily rate (ADR) was basically flat for the week (-0.1%) and up 10% over the same week in 2021. Nominal revenue per available room (RevPAR) also fell week on week (-3.4%) with a year-over-year gain of 13.2%. On an inflation-adjusted basis (real) and compared with the same week of the Labor Day weekend in 2019, both ADR and RevPAR were at a deficit (-1% and -7%, respectively).
Market Recovery Monitor - 3 September 2022
Room demand for the two-day Labor Day weekend was 1.2% higher than in the comparable week of 2019 with occupancy of 76%, the highest of the past four weeks and in line with the summer 2022 average. Market weekend occupancy ranged from 93% in Colorado Springs to 53% in Louisiana South with the majority of the 166 STR-defined U.S. markets above 70%. In fact, a third of all markets reported occupancy above 80% over the two-day holiday weekend.
New York City led the Top 25 Markets during the two-day Labor Day weekend with occupancy of 92.6%, boosted by the U.S. Open. This was the city’s highest weekend occupancy since the start of the pandemic. Twelve of the Top 25 Markets reported weekend occupancy above 80%, including Boston, Chicago, Denver, and Los Angeles with Chicago seeing its second highest weekend occupancy since March 2020. Another 11 Top 25 Markets saw weekend occupancy above 70% but under 80% with only Houston and Phoenix reporting a level under 70%. Overall, Top 25 Market weekend occupancy was 79%, which was the highest level since the end of July.
Combined shoulder (Sunday & Thursday) and weekday (Monday-Wednesday) demand and occupancy fell sharply ahead of the holiday weekend with demand falling by more than 8% WoW and occupancy down 5% WoW. Occupancy for the two time periods combined was 57.6%, which was the weakest since the week of Memorial Day. Only seven markets saw combined shoulder and occupancy day occupancy above 70%, including Boston (75%) and New York City (77%). Denver was also close to that level at 69% with Alaska leading all markets at 82%.
For the full week, Alaska had the highest occupancy (82%) followed by New York City (81%). Boston (79%) and Denver (75%) also had a good week. While San Francisco was not on the top of the list, occupancy was solid at 68%. Ten of the Top 25 Markets reported weekly occupancy above 65% with New Orleans an outlier at 46%. However, NOLA’s weekend occupancy did improve significantly to 72%, with a lift from college football. That level was the market’s highest of the past nine weeks but well below the level seen during Labor Day weekend 2019 (84%).
With Labor Day behind us, the 15-week summer travel season has come to an end, defined as the period commencing with the week of the Memorial Day weekend and ending with the week of the Labor Day weekend. It should be noted that 2009, 2015, and 2020 had a 16-week summer based on those parameters. Summer 2022 average weekly room demand was the third best since 2000, behind 2019 and 2018. As compared with 2019, demand was 2.8% lower with 777,500 less rooms sold on average per week. Summer occupancy achieved 68.3%, which was below the 72.3% seen in 2019. Before the pandemic, summer occupancy averaged 69.5%. However, 25 markets saw their highest summer demand in history, even when accounting for those years with 16 summer weeks. Those markets included Atlanta, Austin, Charlotte, Dallas, Miami, and Nashville. While demand was at a record level, occupancy was not. For example, Atlanta’s 2022 summer occupancy was the eighth best, and Austin’s came in at number 12. New York had its sixth best summer in terms of room demand with occupancy ranked 18th out of the past 23 years. Not surprising, summer ADR and RevPAR were at their highest levels in 2022, but ranked fourth and sixth, respectively, when accounting for inflation.
Weekend nominal ADR rose 5.6% WoW, which was the largest week-on-week gain in 27 weeks. Seventeen markets saw nominal weekend ADR increase by more than 20% WoW with the largest gain seen in New Orleans (+55%). New York City and Atlanta also saw strong WoW gains of +25%. On a hotel-level basis, 103 hotels reported weekend nominal ADR above $1,000, up from 29 in the 2019 Labor Day weekend. Fifty-nine percent of comparable hotels, hotels that were open during the Labor Day weekend in 2019 and were still open this Labor Day weekend, reported real weekend ADR level that was above 2019.
Weekly nominal RevPAR was also strong with 94% of markets above 2019 levels, but that does not account for the shift of the Labor Day holiday. Doing so and adjusting for inflation, one-third of markets had weekly RevPAR above 2019. Looking specifically at the holiday weekend, more than half of all hotels had real weekend RevPAR above Labor Day weekend 2019.
Around the Globe
Global occupancy, excluding the U.S., fell by its largest amount (-5.2% WoW) since the start of the year with the level achieving 61.1%. In the same week of 2019, global occupancy stood at 70.1%. Nominal ADR dropped by 2.4% WoW, which was the third consecutive weekly decrease. With falling occupancy and ADR, nominal RevPAR declined 10%, the largest decrease since January.
One fifth of the global room demand decline came from China, where occupancy fell to 53%, the lowest of the top 10 largest countries based on supply. The decrease in China was widespread with nearly every market seeing a drop, most notably Chengdu, Shenzhen, and Shandong, which accounted for 26% of the room demand decrease by decliners. Of the 43 STR-defined markets, only eight saw week-on-week demand growth.
All but one of the remaining top 10 largest countries saw demand fall during the week with the top 10 accounting for 60% of the weekly demand loss. The U.K. (76%) continued to have the highest occupancy of the top 10 followed by Canada (73%) and Spain (70%). Fiji had the highest occupancy of any country this week (83%) with Ireland and Slovenia also above 80%. On a market-level, Vancouver led at 85%. Overall, only 54 of the 343 markets had weekly occupancy at or above 75%.
Over the past 28 days, real RevPAR was at “peak,” above 2019 levels in 48% of all markets. A third of markets were in “recovery,” (Real RevPAR between 80% and 100% of 2019) and most of the remaining markets were in “recession” (Real RevPAR between 50% and 80% of 2019).
Big Picture
Despite all the hassles, inflation, and overall uncertainty, travel was solid this summer season and into its last holiday. TSA screening numbers, an indicator of air travel, has remained strong with the 7-day average as of Thursday, 9 September remaining above 95% of the 2019 levels. Group business continues to strengthen. Thus, the outlook for the fall travel season is encouraging even with continued uncertainty around the return of business transient travelers.
*Over the past 23 years, the Labor Day holiday weekend has fallen in week 35 12 times, and in week 36, 11 times. This year and in the past two, the holiday weekend was in week 36. In 2019, it fell in week 35. All comparisons account for the shift in the holiday. Data for the full Labor Day weekend will be available in the following week.