Seasonal momentum shifting in U.S. hotel performance

The top hotel markets in this STR U.S. bubble chart update show a seasonal momentum shift from traditional winter/spring break hotspots to a broader range of destinations with increasingly travel-friendly climates.

For the four weeks ending 15 April 2023, recovery growth across a range of industry indicators took a small backstep, with occupancy (64.1%) falling 0.7 percentage points (ppts) from the prior month. Recent occupancy indicators were also down year over year (-0.2 ppts) as well as from 2019 (-5.1 ppts). However, these drops are not a serious concern given calendar impacts.

The four-week period included the extended Easter/Passover holiday, which characteristically constrains corporate travel. With that in mind, it is not too surprising that overall U.S. demand and occupancy decreased from our previous monthly update.

As to annual comparisons, it is important to remember that roughly half of the country had already gotten back on track this time last year, particularly those markets that are seasonally strong during spring. The other half of the country, mostly centered in larger cities, was at the verge of a solid Q3 recovery spurt. Matched comparisons against last year are against a peak pandemic leisure travel period. In making long-term performance comparisons to 2019, it is worth adding that this matched period comparison against 2019 does not include the Easter holiday in 2019—that occurred in later in April.

Time comparisons aside, the industry continues to evolve, and this adds nuance in benchmarking markets’ hotel performance. Leisure travel, which had been king during the COVID era, remains strong during the current phase of the recovery. Compared to last year, however, pent-up demand and excess savings have fallen. Likewise, inflation, relatively flat wage growth along with labor costs have also led to some belt-tightening across personal and business travelers alike. As a result, weekend along with leisure travel have decreased from pandemic peaks toward more usual levels.

Contrasting to the business side, workers are increasingly back in the office with cities benefiting from an improving mix of corporate travel along with gains in convention and group bookings. Travel is returning to cities and moving to normal levels from “diversion destinations.”

In this phase of the recovery, the top performing markets (at least so far into 2023) continue to offer warmer climates and either directly cater to leisure travelers or provide a complimentary mix of leisure-friendly amenities.

The Top 25 Markets were led in occupancy by Tampa (80.4%) which, coming off of Spring Break season, had a 5.5 percentage point decline from the prior four weeks. Notably, the market’s period occupancy generally matches its same time performance last year. Next was New York City (80.3%, +4.2 ppts YoY), Las Vegas (79.4%, -2.6 ppts), Orlando (78.2%, -0.9 ppts) and Oahu (77.5%, +2.1 ppts).

None of the Top 25 Markets matched their 2019 occupancy levels for the recent four weeks. However, many large markets have narrowed their occupancy margins above this time last year. Oahu ran the narrowest occupancy deficit from 2019 (-1.8 ppts) while six of the Top 25 Markets showed four- week/2019 occupancy shortfalls of 10 ppts or greater, including Chicago, Philadelphia, and Minneapolis.

In comparison to the Top 25 Markets, 65 of the 142 remaining STR-defined markets experienced occupancy gains above last year’s weekly match. In total, 25 of 167 markets had better occupancy than in 2019. As noted previously, this long-term comp is not clean nor is it as concerning as recent data includes the week of the Easter/Passover holiday, while the holiday fell later during the pre-COVID comparison.

Gains in average daily rate (ADR) among Top 25 Markets present a more favorable pattern with all but two large markets seeing year-over-year (YoY) increases. Four of the better performing markets (Oahu, Tampa, New York City and Orlando) saw 8% or higher increases in ADR. Perhaps as a reflection of evolving industry revenue strategies or inflation, a handful of lower performing occupancy markets likewise saw hyperactive YoY ADR gains, including St. Louis (+10.5%) and Chicago (+9.4%). Overall, the general pace of annual ADR gains among Top 25 Markets has moderated from prior months.

In terms of revenue per available room (RevPAR), 18 of the Top 25 Markets experienced YoY gains in RevPAR for the match period. New York City had the largest YoY RevPAR dollar gain, increasing $40 (+23.1%) to $213. While Tampa led large markets in occupancy, its YoY RevPAR declined to $118 from $154.

Outside of the Top 25 Markets, the Florida Keys’ four-week 84.8% average occupancy continues to lead other markets for this time of year, with seasonal dominance still in play despite a 0.7 ppt occupancy decline from 2019. For the entire span of the pandemic recovery period, the high-end Keys’ hotel market has been a consistent leisure-driven highflyer, both in terms of occupancy and ADR. For this most recent period, the Keys market was followed in occupancy by Charleston (80.2%, -3.3 ppts YoY); Sarasota (79.1%, +0.2 ppts), Savannah (78.7%, -2.0 ppts) and Fort Lauderdale (77.9%, -2.9%).

Most small-to-medium sized markets saw substantial YoY gains in their nominal (non-inflation adjusted) ADR. When combined with occupancy performance, 33 markets experienced RevPAR growth in the double-digits, which is well in advance of the recent annual pace of inflation. Despite difficult period comps, RevPAR overall grew in 110 markets beyond the Top 25. The steepest annual RevPAR declines occurred in select markets that had the large COVID-spurred gains in 2022.

For more information, be sure to check our weekly Market Recovery Monitor.

If you are interested in accessing the data behind this visual via our hospitality platform in CoStar, please contact please contact info@str.com.