STR Weekly Insights: 2-8 July 2023

Analysis by Chris Klauda and Isaac Collazo

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

U.S. Performance

Following normal seasonal patterns, U.S. hotel occupancy fell for the week ending 8 July 2023. This week is historically slow due to constricted business travel despite increased holiday/summer travel. Occupancy was 61.8%, down 7.9 percentage points (ppts) from the prior week and down 1.5 ppts from last year when July 4th fell on a Monday.

• Since 2000, the July 4th holiday has fallen on a Tuesday just two other times (2006 and 2017).
• In 2017, the change in occupancy was similar, falling 8.9ppts week over week (WoW) and 2.1ppts year over year (YoY). Occupancy, however, was much higher then (65.7%) with this year’s level in line with 2006 (61.9%).
• 2023 room demand was higher than 2006 and 2017.

Average daily rate (ADR) grew 1.2% YoY to US$156, however this was not enough to offset the occupancy decline, resulting in a 1.2% decrease in revenue per available room (RevPAR) to US$96. Nearly identical behavior to this year occurred in 2017: ADR (+1.1% YoY) and RevPAR -2.0% YoY).

The similarity of this year’s performance to the two other benchmark years supports our hypothesis that this year’s performance is a reset to normal industry behavior compared to what we have seen over the past two years.

Not surprising, the July 4th calendar shift from Monday to Tuesday had the greatest impact on those two days.

• Monday’s occupancy increased 6.2ppts YoY and ADR grew 2.3%, resulting in a 15.1% RevPAR gain.
• Occupancy on Tuesday decreased by almost the same amount (-6.3 ppts YoY). ADR, however, increased 10.1% but was unable to drive RevPAR (-2.3% YoY).
• Day-of-week changes became less dramatic as they neared the weekend. After three weeks of consecutive RevPAR growth, weekend RevPAR fell 0.8% YoY via a decline in occupancy (0.9ppts) and flat ADR (0.4%).
• Occupancy on the Fourth of July was 49.6%, which was one percentage point lower than in 2017 and 4.2ppts higher than 2006.

As we have seen in all but three weeks this year, the Top 25 Markets saw better year-over-year performance than rest of the country with flat occupancy (64.8%, -0.2ppts) versus a decrease of 2.1ppts in all other markets (60.3%). ADR growth was weaker in the Top 25 (US$170, +0.2%) versus a 1.6% increase for the remainder of the country. These shifts resulted in essentially unchanged RevPAR (-0.1%) across the Top 25, while the remaining markets experienced a decline in the metric (-1.9%).

By day of week, weekday (Sunday-Thursday) RevPAR fell 2.4% YoY outside the Top 25 while remaining flat in the key markets. Weekend YoY change in RevPAR was nearly identical in the two market types (-0.6% in the Top 25 and -0.9% elsewhere).

Oahu and San Diego were the only Top 25 Markets to post occupancy above 80%. However, several markets saw double-digit YoY RevPAR growth including Tampa (18.7%), Denver (18.2%), New York City (14.7%), and St. Louis (11.4%). NYC saw the largest occupancy gain (7.9ppts) among the Top 25 and was among the top 10 highest occupancy markets this week. Outside the Top 25, Gatlinburg, Myrtle Beach, and the Florida Keys reported occupancy above 80% for the week with all three seeing strong (>7ppts) year-on-year growth.

Myrtle Beach (86.5%) led the nation with the highest Fourth of July occupancy followed by the Florida Keys (82.2%), Gatlinburg/Pigeon Forge (79.1%), Oahu (78.2%), San Diego (75.6%) and New York (70.1%).

Global Performance

Global occupancy (excluding the U.S) at 70.9% clipped the post-pandemic high of 70.8% recorded three weeks ago. That measure was up 6.1ppts YoY with ADR rising 13.2% YoY to US$158. As a result, RevPAR continued to see strong year-over-year growth (+23.9%), attaining a level of US$112, just shy of the highest level recorded last week.

Among the top 10 countries based on supply, occupancy increased 6.9ppts YoY to 74%, its highest level since the start of the pandemic and surpassing the previous high (73.8%) attained last week. Top 10 ADR grew 10.7% YoY to US$149, with RevPAR increasing 22.1% YoY to US$110. All top 10 countries saw RevPAR growth except Mexico, which declined due to falling ADR.

• For an eighth consecutive week, the United Kingdom led the top 10 in occupancy with a level of 85.1%, up 1.7ppts from a year ago. Weekly occupancy was also at its highest level since March 2020, helped by Wimbledon. ADR in the country also grew a strong 12.6% YoY with RevPAR rising 15%.
• RevPAR in Japan continued to see excessive growth (116.2%) led by a 14ppt gain in occupancy and an 89.7% ADR increase.
• Indonesia reported the second-highest RevPAR gain (+46.5%) followed by China (+40.4%).

Outside of the Top 10, destinations well known for leisure and holidays continue to post the highest occupancy as they have for the past six weeks. Ireland (84.7%, +2.4ppts YoY) dropped out of the top spot it occupied for seven of the past 10 weeks. Fiji led the world in occupancy (88.3%, +3.6ppts YoY), followed by Singapore at 87.4%, jumping 12.9ppts year over year and 9.7ppts since last week. Bahamas 84.5% (+13.1ppts), Malta at 83.8% (21.7ppts) and Greece 83.7% (+3.7ppts) round out the list of top markets.

Final thoughts

U.S. occupancy is following normal seasonal patterns. The 4th of July calendar caused a slight hiccup in trends but that was anticipated and on par with past holidays that have fallen on a Tuesday. Overall, the industry (U.S. & global) remains in recovery mode with a solid summer season ahead.

Looking ahead

Next week, U.S. hotel performance is expected to see sharp week-on-week growth, with occupancy increasing by about 10ppts and heading to its annual peak in the last weeks of July. ADR and RevPAR should also improve at a more modest pace. Global hotels will continue their strong performance benefitting from the significant increase in international travelers. Further out, after reaching its annual peak, we expect U.S. occupancy to trend down each week until the Labor Day holiday week. A similar pattern is expected for the remainder of the world.