STR Weekly Insights: 11 – 17 June 2023

Countries included: United States, China, Japan, United Kingdom, France, Indonesia, Germany, Mexico, Canada, Italy, Spain, Ireland, Greece, Malta, and Fiji.

Analysis by Chris Klauda, Will Anns and Isaac Collazo

U.S. Performance

U.S. hotel performance rose heading into summer with occupancy of 70.8%. That level was up 1.5 percentage points (ppts) from the previous week but down 0.8 ppts from last year. The past couple of weeks have produced relatively modest performance compared to the same week last year. With international borders now fully open, Americans’ pent-up demand for international travel is resulting in a softening in domestic travel. On the flip side, international travel to the U.S. has yet to fully recover. Comparing May 2023 to May 2019, more Americans traveled internationally (+8%) while fewer international visitors entered the U.S. (-19.6%) according to the APIS/I-92 Monitor (trade.gov). Over the next couple of months, close attention will be paid to the pace of the return of international travel.

As has been seen in recent weeks, shoulder days (Sunday and Thursday) and weekends (Friday and Saturday) showed declines. In this most recent week, Sunday produced the largest YoY occupancy loss (-2.1ppts) followed by Friday (-1.0ppts), Thursday (-0.9ppts), and Saturday (-0.9ppts). Weekday (Monday – Wednesday) occupancy reflected a smaller decline (-0.3ppts).

• The Top 25 Markets fared much better with weekly occupancy of 75% down 0.4ppts YoY compared to -1.0ppts to 68.6% for the rest of the country.
• Weekday occupancy in the Top 25 Markets reached a post-pandemic high of 76.6%, up 0.4ppts YoY, reflecting the slow but steady return of business travel along with increased vacation travel. Weekend travel declined by 0.5ppts to 78.6%.
• Across the rest of the country, weekday occupancy declined 0.6ppts, and weekend occupancy was down 1.2ppts.  

Revenue per available room (RevPAR) increased 1.5% YoY after falling in the prior week. Average daily rate (ADR) rose 2.6% offset the decrease in occupancy. When adjusting for inflation, weekly real RevPAR was down 2.5% YoY and has fallen for the past six weeks. Real ADR was also down (-1.4%), which was the sixth consecutive weekly decline.

• Shoulder days showed the largest RevPAR decrease (-1.0%) with the measure growing on weekdays (+3.6%) and modestly up on weekends (+0.6%) driven by ADR growth of 4.0% and 1.9%, respectively.
• Top 25 RevPAR was up 2.6% YoY with real RevPAR down 1.4%.
• Non-Top 25 RevPAR was up 0.6% YoY. Real RevPAR decreased 3.3% YoY.

The week also reflected a shake-up in the Top 25 Market occupancy rankings.

• Seattle had the nation’s highest occupancy at 86.8% as various travel inducers came together. The weekend was led by sporting and concert events (Mariners baseball and a George Strait concert. Weekday occupancy was boosted by two large conferences and the seasonal return of the cruise industry to Seattle ports. As a result, the market’s occupancy was its highest since the start of the pandemic.
• New York City posted 85.8% occupancy and, after holding the top spot for seven consecutive weeks, had the nation’s fourth highest level behind San Diego (86.5%) and Alaska (84.1%).
• Among the Top 25 Markets, Oahu saw the largest YoY occupancy gain (+8.3ppts) as occupancy reached 84.1%.
• As host of the PGA’s U.S. Open, Los Angeles saw strong weekend occupancy (87.9%, +8.3ppts) and a large YoY gain in ADR (+20.2%).
• Philadelphia also reported a solid week with its weekly occupancy reaching 73.4%, its highest since the start of the pandemic.

Top markets across the rest of the country included a diverse set of destinations from Alaska to the Florida Keys and several markets in the central U.S.

• Alaska posted the top occupancy at 85.9%, impacted by over 21 hours of functional daylight in June and the recovering cruise industry.
• Gatlinburg followed at 82.7% with the Florida Keys rounding out the list of markets crossing the 80% occupancy line at 82.4%.
• Omaha, at 79.8%, hosting the NCAA College Baseball World Series for its second week in a row with a 5+ppt occupancy increase.
• Kansas City occupancy (75.2%) reached its highest level since the start of the pandemic with a full week of conventions, concerts and sports driving strong performance.
• Pittsburgh saw the nation’s highest YoY ADR growth rate (+38.7%) driven by an 80.9% gain over the weekend with the arrival of Taylor Swift’s Eras tour. Weekend occupancy jumped by 20.9ppts to 93.3.

Segmentation and Hotel Class

Group demand among luxury and upper upscale hotels exceeded last year’s levels by 2.0% while dropping 5.4% from last week. This most recent week represented the peak for group travel for the summer and will continue to decline until the fall season picks back up.

• Among the Top 25 Markets, Las Vegas saw the largest week-on-week gain in group demand. Los Angeles, Minneapolis, St. Louis, San Diego, and Seattle also saw solid group gains.
• Transient demand among luxury and upper upscale increased 1.6% YoY and increased 4.9% over last week.

Combined group and transient occupancy across the hotel classes showed luxury occupancy at 73.5%, declining 0.8ppts YoY, while Upper Upscale at 74.3% increased 0.7ppts YoY. The highest occupancy among the hotel classes was upscale (77.1%). Midscale and economy hotels continued to see declining occupancy at -2ppts and -2.9ppts YoY, respectively.

Global Performance

Global occupancy (excluding the U.S) reached a post-pandemic high of 70.9%, up 6.7ppts YoY. ADR increased 14.8% YoY to US$153, resulting in RevPAR of US$109, also a post-pandemic high and up 26.8% YoY.

Occupancy for the top 10 countries, based on total supply, was 73.2%, up 8ppts YoY. All but France posted YoY occupancy growth. Occupancy in France was flat year over year with the biggest gainer being China, up 14.8ppts to 69.0%.

• China’s 14.8% gain pushed occupancy to 69%.
• Germany was up 11.2ppts (to 78.1%) aided by fairs, notably, two quadrennial exhibitions GIFA (Foundry and metal exhibition) and Thermprocess in Dusseldorf. Beyonce also stopped in Berlin with her Renaissance Tour concert on 15 June.
• The U.K. continued to lead the top 10 with occupancy of 83.6%.

ADR for the top 10 countries grew 13.1% YoY to US$145. RevPAR for the top 10 was US$106, which was up 26.9% YoY. All countries except for Mexico saw YoY RevPAR growth with Japan continuing to see the highest YoY growth at +97%.

Outside of the Top 10 countries, destinations known well for leisure and holidays came in hot with some of the highest global occupancy figures – Ireland 89.0% (+2.2ppts), Greece 87.9% (+5.9ppts), Malta 87.2% (+19 ppts) and Fiji 87.1% (+8.4ppts). Ireland again had the world’s highest occupancy as it has for the past six weeks.

Final thoughts

U.S. occupancy continued to fall short from last year’s level. Some of the challenges include changes in travel patterns, from resorts to Top 25 markets and/or international outbound. ADR is softening, which is not surprising given the changes in demand from pure leisure to a more normal mix of business transient, group and leisure. Outside of the U.S., the recovery remained in full swing. Across all parts of the globe, large gatherings around concerts, sports and festivals will continue to drive performance throughout the summer.

Looking ahead

Based on history, U.S. occupancy will increase for the weekend ending 24 June and fall in the following two weeks before reaching the annual peak in mid-July. As seen in STR’s Forward STAR data, this summer is poised to resemble last summer. However, ADR growth is likely to remain somewhat muted as the demand mix normalizes. As a result, RevPAR is anticipated to be flat to slightly down as compared to last year. Global performance, excluding the U.S., is expected to see healthy growth over the next several weeks.