STR Weekly Insights: 29 January-4 February 2023

Countries included: United States, Japan, France, United Kingdom, Indonesia, Turkey, Thailand, Germany, Mexico, Barbados

U.S. performance

In the week ending 4 February 2023, occupancy fell one percentage point (ppt) week over week (WoW) to 55.4%. The drop was not unexpected given previous history, and more importantly, the decrease was less than what we anticipated based on long-term trends. Weekly demand remained robust and above 21 million for the fourth consecutive week. At this point in 2019, weekly demand had only been above that level for three straight weeks.

As compared to last year, occupancy was up 5ppts. Average daily rate (ADR) also surprised on the upside, increasing 2% WoW to US$145, which was the highest level since the holidays and up 15.1% year over year (YoY). We had expected ADR to be flat to down given history. Revenue per available room (RevPAR) was flat (+0.2%) week over week due to the occupancy decrease, but it too was at its highest level (US$80) of the year thus far and up 26.6% YoY.

Since weekly data started in 2000, there have been two previous years where the calendar composition aligns exactly like 2023: 2006 and 2017. In both of those years, week five produced a week-on-week decrease in occupancy with most of the decrease manifesting itself on weekdays (Monday through Wednesday). In 2006 and 2017, occupancy fell by more than 2ppts WoW. This year’s decrease (-1ppts) was less due to growth over the weekend (+0.7ppts), which in previous years had been down. Shoulder days (Sunday & Thursday) also saw less of a fall (-0.8ppts) versus previous history.

Weekday occupancy dropped 2.2ppts to 56.1% nationwide with Tuesday and Wednesday showing the largest week-on-week declines. In the Top 25 Markets, weekday occupancy also fell, but slightly less (-1.8ppts WoW) with a level of 63.5%. Nearly every one of the Top 25 Markets saw weekday occupancy decreases WoW, except Las Vegas, San Francisco, and Tampa. Las Vegas saw the largest gain (+31ppts WoW) and highest weekday occupancy (87.9%) among the Top 25 Markets due to record-breaking attendance at the annual Kitchen & Bath Industry Show, the NAHB International Builders Show, the National Hardware Show, The International Surfaces Event, the Las Vegas Market Winter Show and the NFL’s Pro Bowl Games.

Five other markets also reported solid weekday occupancy (>70%), including Miami, Phoenix, Orlando, San Francisco, and Tampa. The highest weekday occupancy of any market was seen in Tucson (90%), surpassing Las Vegas, but that market is one-tenth the size of Las Vegas. Among submarkets, the highest weekday occupancy was posted in the Las Vegas Strip (96.9%).

Weekend occupancy increased to 60.7% from 60% a week prior and was up 3.2pts YoY. Recall, weekend occupancy fell for six straight weeks beginning in mid-November. Since then, weekend occupancy has been increasing by 3.4ppts YoY each week on average. As compared to the comparable week of 2019, weekend ADR was 3.3ppts higher, and it was above 2019 in three of the first five weeks of the year. Eleven markets reported occupancy of 80% or more led by Fort Lauderdale (88%). Most of the markets with that level of occupancy were in Florida with Tucson, Salt Lake City, and Austin joining that group.

ADR would have been down in line with historical trends had it not been for Las Vegas (+44.3% WoW), which was boosted by the busy events calendar. Excluding Las Vegas, industry ADR was -0.2% WoW. Other markets seeing large week-on-week ADR gains included Tucson (+21.3%), Montana (21.2%), and Mobile (+15.6%). In the Top 25 Markets, ADR increased 3.3% WoW and 20.5% YoY. Outside those markets, ADR rose 1.0% WoW and 9.5% YoY. ADR remains well above 2019’s level, but real ADR (inflation-adjusted) was at a 3.7% deficit for the week.         

San Francisco reported the largest YoY RevPAR gain (+126%) followed by Las Vegas (+86.9% YoY). Overall, RevPAR was up 42.6% YoY in the Top 25 Markets as all but two (Miami and New Orleans) reported double-digit gains. However, both of those markets did see RevPAR growth with Miami’s RevPAR the highest of the Top 25 at US$199. Maui (US$404) continued to lead the nation in absolute RevPAR. Nationally, real RevPAR was at a deficit to 2019 (-5.6%).

Global Performance

Occupancy outside the U.S. also took a step back in the week, falling to 57.4% from 59.9% a week prior. Despite the week-on-week decrease, the measure was still up 19.5ppts YoY against easy COVID/Omicron comparisons. As compared to 2019, occupancy remained in arrears at -2.1ppts. Unlike the U.S., ADR fell sharply WoW (-6.5%), and the year-over-year growth rate slowed to 12.9% from 31.8% a week prior. As result, weekly RevPAR dropped 10.3%, WoW but the year-over-year gain remained robust at +71.1%.

Weekly room demand dropped 2.2 million room nights WoW with the largest declines seen in Northeastern and Southeastern Asia, which accounted for 41% of the week’s decrease. Western and Northern Europe also saw a sizable decline. Seven countries (Japan, France, the United Kingdom, Indonesia, Turkey, Thailand, and Germany) accounted for a large share of the week’s room demand decrease. Future weeks will reflect the impacts of the devastating earthquake that struck the Turkey/Syria border.

Even with the drop in demand, occupancy in the United Kingdom remained moderately strong at 66.9% and at the highest level of the 10 largest countries based on supply. Japan and Mexico also had weekly occupancy above 60% with every one of the top 10 countries seeing double digit year-over-year growth.  

Like last week, Barbados had the highest occupancy this week (82.1%) followed by the United Arab Emirates (81.9%). Many of the Caribbean destinations had occupancy above 70%. The Middle East, and Central & South Asia were also at that level.

Final thoughts

There should not be concern around the dip in performance. Based on past years, this was quite normal. We remained encouraged with the year-over-year gains, confirming our view that the industry is beginning to be more normal than not. In fact, early indicators suggest that for the U.S., January had the second highest demand of any January before it, behind 2020 but surpassing 2019. While economic headwinds remain, the hotel industry remains on solid ground.

Looking ahead

For the week ending 11 February, U.S. and global performance will likely see a sharp uptick with U.S. RevPAR gaining 5% or more week over week. Many markets will see strong growth, especially Phoenix with the Super Bowl expected to produce the event’s second highest weekend RevPAR.