STR Weekly Insights: 20-26 August 2023

Countries included: United States, Canada, China, El Salvador, Estonia, France, Germany, Indonesia, Italy, Japan, Kenya, Mexico, Spain, Sri Lanka, and United Kingdom

Analysis by Isaac Collazo, Chris Klauda and William Anns

U.S. Performance

Heading into the final days of August, U.S. hotel occupancy (65%) was lower for a fifth consecutive week, which is in line with normal seasonal patterns. The measure was up 0.3 percentage points (ppts) from a year ago but 4.9ppts lower than the 2019 comparable—similar to the previous four weeks. Occupancy is still expected to trend down for the next two weeks and then grow as group/conference travel climbs to its annual peak. Revenue per available room (RevPAR) increased 2.1% year over year (YoY) to US$98, driven by a 1.7% increase in average daily rate (ADR) to US$150. This was the second week of ADR gains below 2%, which we attribute to changing mix and rebalancing of demand. Real (inflation-adjusted) ADR remained just under the 2019 level.

The strength of weekday (Monday – Wednesday) occupancy continued, increasing 0.9ppts YoY.  Compared to weekend and shoulder periods, weekdays have produced better occupancy in all but seven of the 34 weeks this year. Shoulder days (Sunday and Thursday) for this most recent week increased 0.2% YoY, while weekends (Friday and Saturday) declined 0.6ppts YoY. Weekends have shown a drop in occupancy in 22 of the past 34 weeks.

The Top 25 Markets continued to see stronger occupancy growth compared to the rest of the country, rising 0.8ppts YoY to 68.5%. In all but two of the 34 weeks of 2023, the Top 25 Markets have reported greater occupancy gains than the rest of the country. RevPAR in the Top 25 Markets increased 2.9%, led by a 1.7% ADR increase. Occupancy outside the Top 25 was 63.1%, which was flat from last year, with ADR up 1.5%, resulting in a 1.5% RevPAR gain.

Weekday occupancy among the Top 25 Markets showed the greatest year-on-year increase (+1.3ppts), followed equally by shoulder days (+0.4ppts) and weekends (+0.4ppts). Unlike the past two weeks, when weekdays also produced the healthiest ADR gains, the most recent weekday and weekend ADR gains were essentially the same at +1.9% and +1.8%, respectively. With the strong occupancy boost, weekday RevPAR grew 3.9% whereas weekends gained 2.4%. Shoulder days showed the lowest RevPAR increase (+1.9%) via a 1.3% ADR gain.

In the remainder of the country, weekday occupancy increased 0.7ppts YoY while weekends decreased 1.2ppts and the shoulder period was basically flat (0.1ppts). As has been seen for most of the summer, weekdays produced the highest ADR increase (+2.3%), resulting in a 3.4% RevPAR gain. Shoulder RevPAR increased 2.0%, boosted by an ADR increase of 1.8% whereas weekend RevPAR decreased 1.1%.

The nation’s highest occupancy for the fourth consecutive week was in Alaska (89.7%) followed by Portland, ME (84.3%), Oahu (84.0%), Syracuse (82.8%) and New York City (82.0%).

• Alaska’s strong occupancy performance (+2.5ppts YoY) came from a combination of peak cruise and leisure travel season.  
• Portland, ME is also in its high season although its occupancy was 6.7ppts lower than a year ago.
• Oahu continues to see some impact from the devastating wildfire on Maui, which caused a 17.2% YoY decrease in Maui’s room demand.
• Occupancy in Syracuse rose to 82.8% (+0.9ppts YoY), its highest since March 2020 with a lift from the New York State Fair and Syracuse University’s move-in. Over half of U.S. college students returned to campus during the week, according to STR’s School Break Report, and the impact of college move-ins was felt in college towns across the U.S.

New York City was the only other Top 25 Market, besides Oahu, recording occupancy above 80%.  New York occupancy increased 3.9ppts YoY, resulting in the third highest RevPAR increase (+14.0%) across all Top 25 Markets, assisted by a healthy 8.6% ADR increase. Weekday and shoulder periods produced the highest RevPAR increases.

Of all the Top 25 Markets, Houston and Las Vegas saw the largest RevPAR increases (+17.8% and +17.1%, respectively). Houston’s growth was led by strong weekday performance with weekday occupancy up 8ppts and weekday ADR increasing 18%. Las Vegas also posted strong weekday occupancy (+8.7ppts) along with healthy weekend occupancy (+3.8ppts) with ADR up 6.1% and 12.7%, respectively. Other Top 25 Markets seeing strong weekday occupancy growth included Minneapolis (+8.2), Washington, DC (+4.2ppts), and Philadelphia (+4ppts).

Chain scale performance reflects a pattern seen over most of the summer with Upper Upscale (68.5%) posting the largest occupancy gain (+3.2ppts YoY) and RevPAR growth (+4.0%) with weekdays (occupancy: +4.7ppts) driving most of the growth. Upscale saw the highest occupancy (71.6%, +2ppts) and a 4.1% RevPAR gain also benefitting from strong weekday occupancy growth (+3ppts). Luxury occupancy advanced 0.3ppts to 63.4%, but RevPAR decreased 4.2% as ADR fell (-4.4%). Luxury ADR declined across all week parts but its occupancy on Saturday and Sunday increased 2.4ppts.

Occupancy across the remaining chains scales shifted downward in order from high to low with Upper Midscale occupancy up 0.5ppts (ADR: +1.7%) and Midscale occupancy down 0.6ppts (ADR: -0.4%). Economy occupancy was down 2.2ppts (ADR: -0.2%).

Group demand among Luxury and Upper Upscale hotels, which is generally slow during this time of year, increased 3.6% compared to the same week last year. Over the past six weeks, group demand was up 1.7% compared to the same four weeks last year. With group demand trending in a positive direction, this segment is expected to see week-over-week decreases for the next two weeks followed by strong growth up until the holidays.

Global Performance

Global occupancy (excluding the U.S.) softened for the second consecutive week to 71.3% as the measure fell 1.1ppts week over week. However, global occupancy continued to see year-over-year growth (+5.5ppts). ADR increased 12% to US$149, resulting in a 21.3% gain in RevPAR to US$106.

Occupancy for the top 10 countries, based on supply, performed like the rest of the globe with occupancy rising 7.3ppts YoY to 73.2%. Top 10 ADR rose 7.8% YoY to US$137, which was US$13 under the U.S. average ADR, however, for a third consecutive week. Top 10 RevPAR outperformed the U.S., by US$2 at US$100 (+19.7% YoY).

Within the Top 10, China posted the largest YoY gain of 15ppts to 73.8%, followed by Indonesia (+9.5ppts to 74.4%) and Japan (+8.2ppts to 74.5%). At the other end of the spectrum, three countries saw occupancy fall: Germany (-2.1ppts to 67.2%), Italy (-1.8ppts to 68.3%), and Mexico (-1.7ppts to 60.2%). Both Italy and Germany were in line with pre-pandemic August occupancy patterns. The U.K. reported the highest occupancy again among the Top 10 (80.8%, +2.2ppts) while Mexico posted the lowest.

Outside of the top 10, the highest occupancy gainers in each region were:

• El Salvador in the Americas, up 19.7ppts. The country also saw the highest occupancy at 79.9%.
• In Asia Pacific, Sri Lanka led with a gain of 37ppts YoY to 64.3%.
• Estonia had the highest increase in Europe, up 19.5% to 82.9%.
• In the Middle East and Africa, Kenya saw a 26% YoY increase to 55.7%.

Final thoughts

As summer fades into fall, family travel is slowing, college students are returning to campus, group events are strengthening, and business travel appears to be returning based on weekday trends. All of these factors point to a normalization of travel as the industry rebalances and assumes typical seasonal trends. Also, prelim data suggests that August will show a slight increase in the number of rooms sold year over year. If it happens, it will be the first monthly growth in demand since March.

Looking ahead

We will get a better view of the remainder of the year after the week containing the Labor Day holiday passes. This will show us the strength of the fall group season as well as the sustainability of weekday demand growth—all indicators of the recovery of business travel. The growth of weekday demand this summer improved performance across most of the Top 25 Markets, and occupancy on the books for fall remains above last year’s levels, suggesting it will continue. Global occupancy will see similar impacts as the leisure season comes to an end and normal seasonal patterns emerge.