STR Weekly Insights: 12-18 November and 19-25 November 2023

Analysis by Isaac Collazo, Chris Klauda, Will Anns

Countries included: China, Japan, United Arab Emirates, United Kingdom, and the United States

Highlights

• U.S. hotels experienced decent midweek performance in the week before Thanksgiving, a result of business travelers squeezing in trips before the holiday.
• Thanksgiving led to an expected drop (13 percentage points) during the holiday week, reflecting performance declines seen during the past 10 years (excluding 2020 and 2021).
• Global occupancy outside the U.S. continues to show year-over-year growth with the United Kingdom and Japan posting the strongest performance across the largest countries.
• China continues posting the greatest year-over-year increases.
• The Formula 1 Las Vegas Grand Prix had an outsized impact on U.S. hotel performance with the market seeing ADR gains for the race week of 81.9%. The next week, the United Arab Emirates, gearing up to host COP 28, posted the highest occupancy in the world.

U.S. performance

U.S. hotel performance the week before Thanksgiving showed a strong, 7.0% rate increase year over year (YoY). At the same time, occupancy remained essentially flat YoY (-0.4 percentage points), which limited RevPAR growth to 6.3%. Weekends and shoulder periods saw greater occupancy declines, while weekdays remained unchanged compared to last year (-0.1%), an indication that business travelers were on the road getting work done before the holiday.

U.S. hotel occupancy during Thanksgiving week showed an expected drop that was almost identical to declines seen for the prior 10 Thanksgivings (excluding 2020 and 2021). Occupancy at 49.8% dropped 13 ppts from the previous week. When compared to Thanksgiving week last year, occupancy declined slightly (-0.7ppts). Unlike the previous week’s strong rate growth, Thanksgiving week ADR increased less than 1% year over year. Thanksgiving week typically does not produce strong ADR growth. Overall, this year’s Thanksgiving hotel demand was the fifth highest ever, which aligns with TSA screenings hitting all-time highs this week.

As the usual end of year slowdown takes place, events have more impact than if they occurred during higher demand periods. Las Vegas, hosting the Formula 1 Las Vegas Grand Prix 16-18 November, had a significant impact for instance. Las Vegas represents 3.1% of all U.S. room supply, and when significant events occur in a market the size of Las Vegas, the impact is felt throughout the country. Recalculating overall U.S hotel performance for the week before Thanksgiving (minus Las Vegas) still produced a significant rate increase of 3.6% YoY—although much less than the 7.0% YoY ADR increase when Las Vegas is included. Occupancy without Las Vegas decreased 0.1ppts compared to -0.4 ppts with Las Vegas.

For the week before Thanksgiving, the Top 25 Markets on average increased ADR 11.7% YoY with Las Vegas again having an outsized impact as ADR in the market increased 81.9% YoY. Las Vegas occupancy declined 10 ppts as the major event and higher prices kept some tourists and conferences away. San Francisco also had a strong week hosting the Asia-Pacific Economic Cooperation (APEC) Leaders’ Week with an ADR gain of 26.2% driving RevPAR up 36.2%. In addition to the event, conference protests added to the strong market performance. Five other Top 25 Markets achieved YoY ADR increases greater than 10% for the week. The last time seven markets achieved 10%+ ADR increases was in April 2023. Markets seeing these ADR increases YoY, impacted by conference and events, were Boston, Denver, Houston, Seattle, and Washington, D.C. Across the rest of the country, ADR increased 2.4% YoY, matching the pace seen over the past couple months.

During Thanksgiving week, the Top 25 Markets as expected took the biggest week-over-week hit as business and group travel ground to a halt. New York City and Oahu posted the highest occupancies across the Top 25 Markets. Across the rest of the country, leisure destinations (Florida Keys, Gatlinburg, Maui, Kauai, and Fort Lauderdale) earned the highest occupancy. The Florida Keys posted the top occupancy in the nation for the first time since mid-April.

Across all markets, Gatlinburg saw the highest Thanksgiving Day occupancy followed by New York City, Long Island and Bergen/Passaic NJ – the later three helped by the annual Macy’s Thanksgiving Day Parade.

Luxury class hotels saw the greatest year-over-year occupancy increase across the six hotels classes. Economy class hotels continue to post the greatest year-over-year RevPAR decline with most of the decline driven by occupancy declines. Midscale and Upper Midscale hotels also posted negative YoY RevPAR. Hotels in the top three classes saw positive RevPAR.

Global (non-U.S.) performance

For the week ending 18 November, global occupancy (68.7%) continued to improve with a WoW gain of +1.1ppts and YoY gain of +4.6ppts. ADR reached US$135, up 9.7% YoY and resulting RevPAR US$93 (+17.6% YoY).

Japan led the top 10 countries in occupancy at 80.3% with a YoY increase of just +0.2ppts. This lines up with the opening of borders to 16 countries around one year ago, allowing travel to resume, resulting in occupancies within the country climbing ~20%. 

Over the Thanksgiving week, global occupancy excluding the U.S. (68.7%) remained flat compared to the prior week (68.7%), perhaps missing American travelers who stayed home for the Thanksgiving holiday.  Compared to last year, occupancy increased 5.6ppts. ADR for the week was US$134, up 9.8% YoY with a RevPAR result of US$92 (+19.4% YoY).

The United Kingdom held the highest occupancy among the top 10 highest supply countries at 79.1% (+1.8ppts). Within the country, London saw occupancy of 83.4%, while occupancy outside of London was 77.3%. London has seen YoY occupancy gains in 42 of 47 weeks this year, showing that business demand has been returning throughout 2023. The outlook also continues to look slightly stronger in London than the Regional U.K. with occupancy on the books for the next 90 days vs. the same period last year up 1.5% for Regional U.K. and 3.1% for London.

The United Arab Emirates posted a great week gearing up to host COP28, with the highest occupancy in the world as well as its fourth best results for occupancy and ADR this year. Occupancy came in at 88.9%, up 7.6ppts YoY, and ADR (US$240) was up 11.7% YoY.

Looking ahead

The U.S. hotel industry will see some benefit because of the longer break between Thanksgiving and Christmas compared to past years, which allows business travelers and groups to get in one more visit before the end of the year. Outside the U.S., hotel performance will continue to improve for the rest of the year given the easier comps to 2022. As travel normalizes across the world and business travel continues to recover, the true pace of global recovery will be revealed in 2024. The areas seeing the greatest recovery are across Asia, especially China, and 2024 will uncover whether Chinese travelers will venture further afield than nearby Asian countries and boost hotel performance across the globe.