Market Recovery Monitor - 4 June 2022

As is typical, the week of Memorial Day weakened compared with the week prior. U.S. weekly occupancy dropped 3.3 percentage points to 63.2%, which was lowest level of the past eight weeks. As expected, the largest week-to-week decline in room demand occurred on Memorial Day. Overall, room demand fell in five of the seven days with only Sunday and Thursday seeing growth. Of the days with declining demand, Monday accounted for more than half of the decrease. Average daily rate (ADR) also fell, down 3% week on week to US$147. With occupancy and ADR falling, revenue per available room (RevPAR) showed its third largest week-on-week decline of the year (-7.8%) with the measure at US$93. All three measures (occupancy, ADR and RevPAR) were up year over year though the gains were the smallest of 2022 so far.

The three-day holiday period (Friday-Sunday) set a Memorial Day record for demand as more than 12.3 million rooms were sold. Previously, 2019 was the record, however, 2022’s gain over 2019 was a mere 11,300 room nights—but 88,000 more than last year. Occupancy for the three-day holiday reached 73.9%, 3.1 percentage points behind the record set in 2016. This year, however, included 1.4 million more available room nights than in 2016. Room demand for Memorial Day itself was also the most ever, topping 2021’s level, which was the record, and occupancy (44.8%) reached its second highest level, also behind 2021 (45.4%). As compared with 2019, Memorial Day demand increased 108,000 room nights. The gains in the 3-day weekend and in Memorial Day room demand were led by Upscale and Upper Midscale hotels, which both set room demand records. Luxury and Upper Upscale trailed 2019 in both periods, which holds the record. However, for Midscale and Economy, the record for the 3-day weekend was set in 2000, but for Memorial Day, the record was established last year. ADR and RevPAR for both the 3-day weekend and Memorial Day were the highest ever recorded on both a nominal and real (inflation-adjusted) basis.

Market occupancy was led by Hawaii/Kauai (77.4%), as only 16 of the 166 STR-defined markets reported weekly occupancy above 70%. Additionally, more than 80% of markets reported a week-on-week occupancy decrease with Phoenix, Boston, and the Florida Keys seeing weekly occupancy decline 10 percentage points or more. Oklahoma City led the nation in occupancy growth (7.7 percentage points) followed by Wisconsin South, and Gatlinburg/Pigeon Forge. No market set a pandemic-era occupancy record this week.

Weekend occupancy fell by a similar amount (3.2 percentage points) to 74.8%. The highest weekend occupancy was seen in Oklahoma City (89.6%), led by one of two Pride events scheduled in June. Chicago (89.2%), and Columbus, OH (Memorial Tournament) followed Oklahoma City. In total, 34 markets saw occupancy achieve 80% or more over the weekend. While no markets set pandemic-era occupancy records for the week, four did over the weekend including Chicago, Oklahoma City, Columbus and Seattle.

Weekday occupancy was noticeably down following the holiday weekend with Tuesday and Wednesday at 58.9%, which was the lowest level since mid-February. Tuesday and Wednesday occupancy was a bit better in the Top 25 Markets (60.4%) but lower in central business districts (CBDs) at 56.7%. However, four CBDs, Denver, Los Angeles, Portland, and San Diego did see growth in the week with Denver posting the highest occupancy in the group (82.5%).

New York City occupancy also declined with weekly occupancy at 75% after coming in at 82.8% a week prior. The level was still elevated versus what it was several months ago. Nine of the city’s 10 highest occupancy levels of the pandemic-era have occurred in the past nine weeks. This most recent week’s occupancy was the 10th highest since the start of the pandemic. Weekend occupancy rebounded to 82.3% and has been above 80% in 10 of past 12 weeks. In 2021, weekend occupancy only reached that level seven times.

While down, weekly ADR retained some of its strength with a level that was the 11th highest of the pandemic-era. Biggest gains week over week were seen in Oklahoma City (+14.3%), followed by Wisconsin South (+12%) and Columbus (+10.9%). In total, 20 markets posted weekly ADR growth above 5%. As compared with last year, weekly ADR was up 18.5% nationally. Some of ADR strength came from growth on Sunday of the holiday weekend. Excluding that day, ADR was down 5% week over week versus the reported 3% decrease. ADR fell every day week on week except Sunday (+10%) and Thursday (+2.6%). The largest daily ADR declines were seen on Monday (-9.6%), Tuesday (-8.5%), and Saturday (-9.2%). Total weekly ADR was down in the Top 25 Markets (-4.3%) and CBDs (-3.4%). However, CBD weekend ADR (US$257) was second highest of the pandemic era, increasing 4.1% week on week, led by sharp gains in the Chicago CBD (45.6%), Seattle CBD (19.9%), Minneapolis CBD (16%) and eight other CBDs.

Like ADR, RevPAR decreased in all days after the holiday with the rate of decrease lessening through Thursday when it was up (+7.7%) but then falling again over the weekend. The Top 25 Markets (-10.9%) and CBDs (-13.5%) saw a sharper weekly decrease, especially on Tuesday and Wednesday (19.1% and -23.1%, respectively). Nationally, weekend RevPAR was down 10.7%, but the decrease was less in the Top 25 (-8.1%) and especially in CBDs (-1.0%). Collectively, the Top 25 and CBD figures were boosted by strong growth in Chicago, Minneapolis, Seattle, and others. Chicago’s weekend ADR reached US$211, the seventh highest in the country. Maui led the nation with weekend RevPAR of US$409. The market also had the country’s highest full week RevPAR (US$391). Weekly RevPAR was up 21.5% as compared with the same week a yar ago.

Over the past 28 days, 83% of U.S. markets show “peak” nominal RevPAR (RevPAR indexed to 2019 above 100) with nearly every other market in “recovery” (RevPAR indexed to 2019 between 80 and 100). On an inflation-adjusted basis, 43% have “peak” real RevPAR with 49% in “recovery.”

Around the Globe
Outside of the U.S., occupancy decreased 2.7 percentage points week over week to 60.6%. ADR increased 2.1% to US$131.55, which kept the RevPAR decline to 2.2% RevPAR. Seventy-three of the countries tracked on a weekly basis saw a week-over-week drop in occupancy – a regression compared with the previous week. 

Germany reported strong occupancy growth compared with the previous week, up 5.8%, coupled with a 13.4% ADR uplift. Several events propelled demand including IFAT in Munich, Logimat in Stuttgart, and IMEX and CHEMSPEC in Frankfurt.

China saw a 3-percentage point drop in occupancy levels compared with the previous week with occupancy falling 46.5%. Despite its reopening, occupancy in Shanghai fell 21 percentage points week on week to 45.6%, likely driven by the loss of medical workers in hotels and the release of quarantine facilities. Despite this, ADR in China increased 7.3%, driven by Sichuan and Guangdong. 

Ireland continued to see strong occupancy with this week’s level (84.7%) up 6.2 percentage points compared with the previous week. Greece also achieved a strong performance in the week, up 3.6 percentage point to 79.8%. Northern Europe again saw the highest occupancy (75.9%) of any sub-continent, down 3.8 percentage points compared to last week, with Northeastern Asia with the lowest (47.0%).

Over the past 28 days, 20% of non-U.S. markets remained in “Recession” (RevPAR indexed to 2019 between 50 and 80) with another 5% in “Depression” (RevPAR indexed to 2019 under 50). While this is a bit worse than in the previous last week, we are beginning to see better performance across markets, and we expect this to continue in the summer months. 

Big Picture
Optimism abounded during the 44th annual NYU International Hospitality Investment Conference with many speakers expecting a strong summer and solid growth in the coming year despite a number of potential headwinds. Their comments support the latest U.S. forecast from STR and Tourism Economics, which upgraded the recovery timeline for U.S. hotel RevPAR. On a nominal basis, the metric is now expected to surpass 2019 levels in 2022 based on robust ADR growth and solid demand. While this week was slow, which is normal, next week should show strength, ramping into a strong summer.