STR Weekly Insights: 26 November – 2 December 2023

Analysis by Isaac Collazo, Chris Klauda, Will Anns

Countries included: Germany, Spain, United Arab Emirates, United Kingdom, and United States

Highlights

• Weekdays (Monday-Wednesday) were the only days with year-over-year RevPAR gains in the U.S.
• The Art Basel calendar shift negatively impacted Miami’s performance as well as the entire U.S.
• Concerts and sporting events drove Europe’s performance.
• The UN Climate Change Conference (COP 28) propelled Dubai.

U.S. performance

Moving past Thanksgiving, U.S. hotel occupancy reached 54.2%, an expected increase of 4.8 percentage points (ppts) compared to the prior week but down 0.9 ppts versus last year. Average daily rate (ADR) increased 0.8% year over year (YoY), which was insufficient to grow RevPAR (-0.8%). Miami had a significant impact on performance this week due to the calendar shift of Art Basel, which resulted in a 50.6% RevPAR decrease for the market. Excluding Miami, U.S. RevPAR would have increased 1.2%, which is in line with 2017, a year with the same calendar makeup as 2023. For background, Miami’s Art Basel in 2022 began on 28 November with most of the activities taking place on the weekend. This year, it began 4 December.

Despite the negative impact from Miami, weekdays showed better performance with RevPAR increasing 2.7%, driven by ADR (+2.7%) as occupancy was flat to last year. The weekend and shoulder periods produced declines in both occupancy and ADR, resulting in RevPAR declines of -3.3% and -3.1%, respectively.

Weekday performance in the Top 25 Markets was similar to the industry overall. However, the decrease in weekend RevPAR (-5.2%) was much worse than in the remaining markets (-0.7%) due to the impact of Miami. The shoulder period for both market types was somewhat similar. Overall, the change in ADR was the big driver between the Top 25 and the remaining markets. ADR was down in the Top 25 Markets (-0.2%) and up elsewhere (+1.9%). Excluding Miami, Top 25 Market ADR increased 3.4%, and RevPAR topped 2.4%, well ahead of all other markets (+0.2%).

New York City and Las Vegas posted the highest occupancy across the Top 25 Markets, contributing to RevPAR increases of +17.2% and +12.2%, respectively. The greater RevPAR growth impact in the two markets came from ADR. These markets also experienced the highest weekday occupancy.

New York City’s occupancy topped 2019, as it has 26 times this year. Supply declines are contributing to the occupancy gains. Since the beginning of June, supply has decreased by more than 3%, with most of the declines driven by hotels closed for the housing of migrants. Demand is still lower than what it was in 2019, but ADR growth is soaring with most of the growth coming from the smaller, non-traditional submarkets in the city like JFK and LaGuardia, which have a limited amount of supply but have seen a sharp decrease in inventory. That being said, firsthand observations while in the city during the week ending 9 December as well as conversations with restauranters and retailers suggest that demand for the Big Apple’s holiday spectacular will drive strong growth from now until the beginning of the year.

During the weekend, markets across the country hosted college football conference championship games. Indianapolis hosted the Big 10 Championship and claimed the second highest Saturday occupancy (90.3%) in the nation after New York City (91.8%). Indianapolis RevPAR for the day increased 13.0% versus last year. The two New Jersey markets (Bergen/Passaic and Newark) surrounding New York City also experienced strong Saturday performance with occupancy above 85% and double-digit RevPAR growth.

Group demand returned and was essentially the same as last year. Notable this year is the change in week part mix, which reflects the strengthening of business groups as weekday group demand increased 2.5% YoY, while group demand declined on the weekend (-0.8%) and shoulder days (-2.9%).

Global hotel performance

Global occupancy, excluding the U.S., reached 66.8%, up 5.5ppts YoY and down slightly week over week (-1.9ppts). ADR reached US$131, up 7.3% YoY with RevPAR at US$87 (+17.0% YoY).

Performance in the top 10 countries, based on total supply, was slightly above the global average with occupancy of 67.4%, up 7.4ppts YoY and down marginally from the previous week (-1.7ppts). The group was led by strong gains in both occupancy and ADR from countries outside of Asia, mainly Germany and Spain.

Large football matches took place Tuesday and Wednesday throughout Europe for the group stages of the Champions league, which includes the biggest European football clubs, drawing international crowds. In Spain, Barcelona, Madrid and Seville each hosted a match which impacted the country’s performance (Occ: +6.7ppts, ADR: +12% YoY). The United Kingdom also hosted matches throughout the country and returned the highest occupancy for the top 10 countries at 79.8%, up 1.1ppts YoY. Occupancy for Germany was up 8.4ppts to 74.6%, and ADR climbed 13.1% YoY. Along with the European football matches, Germany’s capital, Berlin, hosted back-to-back nights of Madonna’s European tour, which also boosted the city’s performance.

Outside of the top 10, COP 28 kicked off in Dubai. Three days into the event, UAE ADR was up 68% YoY to US$332 with an occupancy gain of 2.8ppts.

Looking ahead

We expect the industry data to show the benefit of the slightly longer time between Thanksgiving and Christmas this year. This should encourage more travel  than previous years, particularly in the business segment. We were surprised by the tepid performance this week, but when you exclude Miami, it seems normal. Next week is expected to show stronger performance, from the gain in Miami due to Art Basel. Hoteliers and restaurateurs have also reported strong growth in New York City. Outside the U.S., hotel performance will continue to improve for the rest of the year given the easier comps to 2022. As the year ends, events, festivals and holiday activities will be the main drivers of travel throughout the globe.