STR Weekly Insights: 15-21 January 2023

Countries included: U.S., Barbados, Fiji, Aruba, United Arab Emirates, United Kingdom, China

U.S. performance

As expected, U.S. hotel performance paused with the MLK holiday during the week ending 21 January 2023. Occupancy fell to 54.2% from 54.8% in the previous week but was up 5.6 percentage points (ppts) from a year ago. As compared to previous MLK holiday weeks, this year’s occupancy was in the middle of the pack, ranking 15th out of the 24 occurrences measured by STR. However, room demand was the third highest, behind 2020 and 2019. Occupancy levels for those two years were also the two highest ever recorded for the MLK holiday week.

Demand for the week fell 235,000 room nights week over week (WoW) with most of the decrease coming from the weekend (Friday & Saturday), which was down 550,000 room nights from the week prior. Weekday (Monday-Wednesday) was also down, but to a lesser extent (-161,000 rooms). Shoulder days (Sunday & Thursday) offset the weekday and weekend demand decrease, gaining 476,000 room nights, with most of the gain coming on Sunday of the holiday weekend. Most of the demand decline was centered in the Top 25 Markets, which accounted for 55% of the week-on-week difference. In those markets, the weekend was also largely responsible for the weekly demand decrease. However, the Top 25 Markets had higher occupancy levels among all day categories with weekday and weekend levels above 60%.

While the Top 25 Markets saw a week-on-week demand fall, it’s not surprising they also showed the largest year-over-year gain in occupancy (+9.4ppts to 60.3%) given last year’s Omicron’s impact. Each of the Top 25 Markets saw year-over-year growth. While down compared to last week overall, the Top 25 did see week-over-week growth Tuesday through Thursday, highlighting the continued recovery in business and group travel. Occupancy on those days topped 61.9%, led by Tampa (82.3%), Oahu (78.4%), Phoenix (76.9%) and Miami (76.3%). New York City showed decent occupancy on those days at 67.7%.

Group demand was largely responsible for the softer occupancy in the Top 25 Markets, accounting for 58% of the total weekly demand loss. It’s worth noting that this year’s group demand was in the lower end of the spectrum when looking at previous MLK weeks and nearly 500 million less than the record seen in 2019. Among the chain scales, the largest deficit to 2019 was in Upper Upscale, which makes sense given that segment’s exposure to Group.

In other markets, demand was also down week over week with occupancy of 50.9%, down 0.4ppts WoW and up 3.6ppts YoY. Fort Myers had the highest occupancy (83.6%) as rebuilding continues post Hurricane Ian. Hawaii/Kauai had the next highest weekly occupancy (81.1%). The 10 highest occupancy levels were all in destinations, most of which are in Florida.

Average daily rate (ADR) and revenue per available room (RevPAR) both showed strong year-over-year growth with the week’s levels the highest recorded for a MLK week. Using inflation-adjusted figures, both real ADR and real RevPAR were in the lower range of previous MLK week results. Weekly nominal ADR was US$140 with weekly nominal RevPAR at US$76.

Global Performance

Occupancy remained relatively flat compared to the previous week, coming in at 52.8% when excluding the U.S. This was 13.8ppts ahead of 2022 levels and 12.5ppts behind the comparable week in 2019. While encouraging, it was also expected that 2023 would start well ahead of the previous year given Omicron’s impact in early 2022.   

Just like the U.S., destinations were popular during the week, with occupancy led by Barbados (86.5%), Fiji (76.6%) and Aruba (75.9%). The United Arab Emirates also reported strong occupancy (80%).

Among the top 10 largest countries, based on supply, the U.K. led (68.1%) in occupancy. After a fortnight of growth, occupancy in China fell to 39.4%, the lowest of any of the top 10 countries. 

The Middle East region saw the strongest occupancy performance at 70.2% for the week. This was supported by the UAE, which saw robust occupancy and ADR levels, up 13.8ppts and 6.5%, respectively, from the previous year. Dubai and Abu Dhabi outperformed the UAE provincial market, both seeing occupancy and ADR ahead of the prior year and 2019 levels. Dubai saw occupancy come in at 83.0%, up 17.5ppts YoY. Abu Dhabi followed closely behind with an occupancy of 79.3%, up 6.1ppts YoY. While Dubai’s ADR was flat from the previous year, Abu Dhabi saw a 41.4% year-over-year uplift, thanks to World Future Energy Summit 16 -19 January.  

Final thoughts

While this wasn’t a record MLK week, we were encouraged to see demand gains after the holiday among the U.S. Top 25 Markets. Year-over-year occupancy growth was also widespread across nearly all markets with the Top 25 seeing stronger gains, indicating recovery despite increased economic uncertainty. For the month, as of 21 January, industry occupancy stood at 52.1% as compared to 52.9% in 2019.

Looking ahead

Based on past history, U.S. performance will likely see moderate growth next week (week ending 28 January) across all measures. U.S. occupancy is expected to see a seven-week high. Stronger performance is also expected around the globe with performance levels feeling more normal than they have since 2019.