Market Recovery Monitor - 31 December 2022

Note: This is the final edition of the Market Recovery Monitor. Beginning 13 January, the MRM will be replaced by a new series, “STR Weekly Insights.” This is also the final weekly analyses to utilize STR’s current non-participant modeling methodology and U.S. Top 25 Markets. Moving forward, Las Vegas will replace Norfolk/Virginia Beach in the Top 25. Read more HERE.

Key Takeaways:

• U.S. room demand reached an all-time high for the 25-31 December holiday period.
• Airport hotels saw an occupancy lift due to Southwest flight disruptions.
• U.S. average daily rate (ADR) reached a record-high on a nominal basis, led by Hawaii markets.
• Canada, France, Mexico, and the United Kingdom led occupancy gains over 2019 comparables.
• Aruba, Barbados, Fiji, Curacao, and the United Arab Emirates eclipsed 80% occupancy.

U.S. hotel occupancy for the last week of 2022 reached 54.2%, which was the fourth highest level recorded for the comparable week over the past 23 years. Only the last weeks of 2016 (54.9%), 2015 (54.8%), and 2021 (54.3%) were higher. This year’s room demand, however, was the highest ever for the week. As compared to the three other years that matched exactly with the day of the week for Christmas and New Year’s Eve, this year’s occupancy was the second highest. Nominal average daily rate (ADR) reached an all-time high, surpassing the previous record that was set a year ago and increasing 4.4% year over year (YoY) to US$167. Nominal revenue per available room (RevPAR) was up 4.2% YoY to US$91. While not a record high, nominal RevPAR (US$91) was the highest versus comparable holiday weeks. Real ADR and RevPAR were both above 2019 but slightly trailed what was seen a year ago.

Forty markets, including Atlanta, Boston, and Chicago, saw their highest occupancy ever for the last reporting week of the year. Gatlinburg/Pigeon Forge (87.6%) had the nation’s highest occupancy followed by the Florida Keys (86.8%) and New York City (84.3%). The city had the highest occupancy of any market for December (83.2%) and the fourth quarter (82.2%).

Looking at the seven days of the holiday period (25-31 December) across the past 23 years, this year’s occupancy was behind five others, led by 2018 (55.0%), but ahead of 2021 (53.7%) and nearly equal to 2019. Room demand (21.0 million) was the highest ever for the period, beating the record set a year ago (20.7 million). Of the 166 STR-defined markets, 46% saw occupancy above 50%, a higher percentage than in 2019 but slightly less than in 2021. More than a quarter of all U.S. markets saw occupancy above 60%, which was also better than in 2019 and higher than in 2021. Twenty-four submarkets saw occupancy surpass 80% during the 7-day holiday period, led by Key West (90.7%) but also including some larger submarkets like Lake Buena Vista (86.4%), which includes the Walt Disney World resort, New York Midtown East (85.8%), New York Midtown West/Times Square (85.7%), and Disneyland (82.1%).

Among the 10 largest hotel submarkets with a major Southwest Airlines presence, and for the four days most impacted by Southwest’s cancellations (26-29 December), airport hotels (those with “airport” in their name) reported their highest occupancy ever (64.9%). More than 31% of hotels in those submarkets had occupancy above 80% during that period. Denver Airport/East achieved a collective occupancy of 75.1%, which was the highest occupancy that group has ever seen for those four days. BWI Airport hotels saw record occupancy with a rate of 52.8%. Occupancy in airport hotels in Phoenix (70.9%) and Nashville (60.1%) were also elevated during that period and at their highest level of the past three years.

New Year’s Eve occupancy (63.6%) was the highest of the week but not the highest of the past 23 years. The night ranked sixth highest overall, well behind 2016 (68.7%) when the day also fell on a Saturday. Room demand was the highest ever recorded (3.52 million) as compared to 3.50 million in 2016. Thirteen of the Top 25 Markets saw occupancy surpass 70% on that day with New York City seeing the highest occupancy (88.3%) of that group but well below 2019 (92.5%). Collectively, Top 25 Market occupancy for New Year’s Eve reached 72.7% as compared to a record high of 80.1% seen on the same day in 2016.

Weekly occupancy among the chain scales ranged from 47.6% in Midscale to 59% in Luxury. Upper Midscale (55.9%) had its highest occupancy for the comparable week since daily reporting began in 2000. That also held true for the period of 25-31 December. While Luxury had the highest occupancy for the week, it trailed the level seen in 2019 (62.1%). For New Year’s Eve, Luxury also had the highest occupancy (76.1%), but it too was less than what was seen in 2019 (82.8%) and 2016 (86.4%), which was the last time the holiday was on a Saturday.

Weekly nominal ADR was the highest ever recorded by STR going back to 2000. Recall, the previous record was set a year ago during the same holiday period. Real ADR, however, was not a record as it was 8 cents (USD) below last year’s level. Ten markets set all-time records for weekly ADR led by Maui, where ADR topped US$1,164, which was the highest of any market ever. Hawaii/Kauai (US$714) also set a record for its market as did Oahu (US$460) and Orlando (US$200). Real ADR was also at a record level for Maui and Hawaii/Kauai. Thirty-one markets saw ADR increase by more than 10% YoY with Montana seeing the largest gain (+27.6%) followed by New York City (+26.5%). Even with the large increase, New York’s weekly ADR (US$360) was well below previous weekly peaks, but it was the highest level seen for the comparable holiday week.

U.S. daily nominal ADR on New Year’s Eve was also the highest daily nominal ADR ever recorded by STR (US$199), but daily real ADR was US$3 less than a year ago. Maui (US$1,121) had the highest daily nominal ADR on New Year’s Eve, up 3.2% YoY. Florida Keys, Hawaii/Kauai, Colorado Area, and Miami all reported daily nominal ADR above US$500.

Most markets reported their highest nominal RevPAR for the comparable week going all the way back to 2000. A handful of markets also saw their highest nominal RevPAR of any week since 2000, including California North Central, Gatlinburg/Pigeon Forge, Hawaii/Kauai, Maui, and Oahu. Maui had this week’s highest nominal RevPAR (US$872). All but three markets (Los Angeles, San Francisco, and Fort Myers) were above 2019 for the comparable week. Nominal RevPAR for the month was also above 2019 for most markets.

Looking back at the full year, 135 markets (81%) of markets saw nominal RevPAR surpass 2019 with the U.S. aggregate 8% higher than what it was in that year. U.S. real RevPAR trailed 2019 by 6% but 65 markets did surpass the 2019 level. Nearly all the markets with real RevPAR above 2019 were destinations and or rural, led by Sarasota and Florida Keys where full-year real RevPAR was more than 30% higher than what it was in 2019. Five of the Top 25 Markets (Miami, Norfolk/Virginia Beach, Phoenix, San Diego, and Tampa) had real RevPAR above 2019 with Tampa in the lead (+8%). San Francisco had the lowest full-year 2019 index of any market with real RevPAR 42% lower than in that year.

Around the Globe

Outside of the U.S., occupancy rose to 56.1%, 7 percentage points (ppts) higher than a year ago. Thirty-five of the 103 countries tracked weekly saw occupancy surpass 2019 for the comparable week, including Canada, France, Mexico, and the United Kingdom. Nominal ADR increased 26.8% to US$188, which was the highest level since the start of the pandemic and well above 2019. Nominal RevPAR also reached a pandemic high (US$106), up 52% from a year ago.

Non-U.S. occupancy (56.1%) over the holiday period (25-31 December) was good but continued to trail 2019 (64.6%). Five countries (Aruba, Barbados, Fiji, Curacao, and the United Arab Emirates) all saw occupancy above 80% during those days. New Year’s Eve occupancy outside the U.S. reached 68.3% as compared to 2019’s 74.4%. Six of the top 10 countries, based on supply, saw occupancy on that day surpass 70% with the U.K. right at 80%. Occupancy in China continued to struggle, falling over the fortnight to 39.8% this past week.

Over the past 28 days, 57% (196 of 344) of non-U.S. markets were at “peak” real RevPAR (real RevPAR above 2019) with another 24% in “recovery” (real RevPAR between 80% and 100% of 2019). For the full year, 51% of non-U.S. markets had nominal RevPAR above 2019 with 30% having real RevPAR above it.

Big Picture

The year ended on solid footing with a strong holiday season despite the winter storm that derailed travel plans pre- and post-Christmas. ADR continued to surprise on the high side. The industry’s recovery has been strong and continues to be led by leisure although group and business travel saw a solid return in the fourth quarter. Three years after the start of the Great Recession, real RevPAR was down 18%. Three years after the start of the pandemic, real RevPAR is down just 6%. While the speed of the recovery is expected to slow due to the looming recession, the industry is in a good place all things considered.