STR Weekly Insights: 30 April – 6 May 2023

Countries included: United States, United Kingdom, Spain, Germany, Italy, China, Mexico, France, Canada, Japan, Indonesia, United Arab Emirates, Ireland, Senegal, Fiji, Puerto Rico, and Lithuania.

U.S. Performance

As we move into the period between spring and the post-Memorial Day summer kickoff, U.S. hotel industry occupancy showed an expected and modest decline of 1.4 percentage points (ppts) from the prior week.  Performance remained strong relative to last year with occupancy of 65.2% growing 1.2 ppts from the matched week last year. Important to note:

• There was a Mother’s Day calendar shift making an easier comp to last year with Mother’s Day occurring one Sunday earlier in 2022. The opposite will occur in the next week of data.
• Historically, Mother’s Day and the preceding weekend produce slightly lower occupancy compared to the weekends before and after Mother’s Day.

Group demand softened, while several notable events (Kentucky Derby, Miami’s Formula One race, Taylor Swift’s Era Tour and, across the pond, King Charles’ coronation) impacted weekend transient demand.

Average daily rate (ADR) at US$158 was US$1.48 higher than the prior week with a 6.4% increase year over year (YoY). The increase was just ahead of the pace of the most recent CPI-indexed annual inflation rate (5.0%). Real ADR (inflation-adjusted) was about 1% lower than the 2019 comp after being in positive territory the prior fortnight.

With slightly weaker occupancy, revenue per available room (RevPAR) fell US$1 week over week (WoW) to US$103. This minor decline was on par with historic seasonal patterns, and we expect more variable weekly performance with some slower weeks headed into the Memorial Day holiday. U.S. RevPAR increased a healthy 8.4% YoY, comfortably ahead of annual inflation.

Day-of-week patterns showed above average WoW occupancy declines Monday through Thursday with improved occupancy on Saturday. Friday was basically unchanged, and Sunday matched the average decline. A longer-term comparison to the 2022 weekly comp shows weekends improving significantly, a reversal of the declining trend seen in recent weeks, however, Mother’s Day being in the comparable week last year likely had an impact. Weekdays compared to last year improved slightly. As compared to 2019, all three-day parts (shoulder, weekday and weekend) were at a deficit with the largest decline in the weekdays (-4.8ppts).

The U.S. Top 25 Markets finished the week at 71.1% occupancy (-2.7 ppts WoW). A smaller weekly decline pattern was seen in markets outside of the Top 25 (-0.7 ppts WoW to 62.0%). Compared to the same period last year, the Top 25 Markets increased 2.1 ppts while all other markets increased 0.7 ppts. Monday through Wednesday occupancy for the Top 25 Markets increased 1.4 ppts to 70.3%, while Friday through Saturday occupancy increased a whopping 4.9 ppts to 78.7%, boosted by Chicago, Nashville, Philadelphia and others.

ADR for both the Top 25 Markets (US$191) and all other markets (US$137) remained unchanged WoW. Of note, YoY growth rates in ADR provides one of the sharper distinctions between the Top 25 Markets and non-Top 25 destinations with 8.4% ADR growth in Top 25 vs. 4.3% growth in all other markets. The latter increase becomes a decrease after factoring for inflation. One key difference is that many smaller markets had already achieved or at least came close to pricing-peaks by this time last year due to strong leisure demand. Meanwhile, many larger markets for this period were just starting to gain demand (and pricing power) through both a partial return of corporate travel but also some shifting leisure patterns.

For the fifth consecutive week, New York City led the Top 25 Markets in occupancy at 85.1% (+8.4 ppts YoY), and the city also posted the nation’s highest occupancy this as it did in the previous week. Other occupancy leaders included Oahu at 80.2% (+8.7 ppt YoY), Anaheim at 75.2% (+6.1 ppts YoY) and Nashville at 76.5% (+3.1 ppts YoY). Nashville was buoyed by singer Taylor Swift’s three stadium shows:

• Weekend occupancy in the Nashville market was 94.2% with an ADR of US$318. Occupancy and ADR in downtown Nashville was 97.3% and US$571, respectively.
• In Atlanta, where Swift performed in the previous week, weekend occupancy reached 81.8% with an ADR of US$162. Atlanta downtown, where the concert took place, saw occupancy of 90.8% and a US$320 ADR. This shows the impact the market size has on event-led occupancy as both shows had a similar number of attendees.
• The tour moves to Philadelphia and onto Boston the following week. A deeper dive into the hotel performance during this tour is scheduled for the coming weeks.

Two other major events took place over the weekend.

• Miami hosted the Formula One race, which spilled into another week of data with the conclusion on Sunday, 7 May. Occupancy in Miami on Saturday night was 89.0% with an ADR of US$363.
• Louisville celebrated the 149th running of the Kentucky Derby and bested both Miami and Nashville with an ADR of US$657. Weekend occupancy was 91.7%.

Segmentation

Group bookings at luxury and upper upscale hotels softened with room night demand dropping 7.7% WoW. However, group bookings remained strong at 13.2% above last year’s levels. Transient bookings at luxury and upper upscale hotels also softened 2.6% from the prior week but were 1.3% above last year’s levels.

• Eighteen of the Top 25 Markets experienced WoW group declines, while 14 of the Top 25 Markets experienced a WoW transient decline.
• Strongest group markets week over week were Los Angeles, Seattle, Miami, and Las Vegas.
• Strongest transient markets week over week were Orlando, St. Louis, Boston, and New Orleans with a boost from Jazz Fest.

Global Performance

Global occupancy, excluding the U.S., was 65.4%, declining 5.6ppts from the previous week’s recovery-era high that was lifted by holidays across the globe, including Eid al-Fitr and the May Day holiday. The week’s level was 7.1 ppts above the same week last year. Weekly ADR rose 18.9% YoY to US$148, resulting in a RevPAR (US$95) increase of more than 30% from last year. Seasonal ups and downs are expected for the next couple weeks as we move closer to the summer holidays.

Among the top 10 countries based on supply, occupancy was 63.1%, a decline from the recovery peak (70.1%) the previous week. The week’s level was up 7.1ppts YoY. Italy had the highest occupancy among the top 10 at 74.0% and was followed by the United Kingdom (72.6%). The largest year-over-year occupancy gain was seen in China (+19.9ppts), where occupancy topped 61.6% but was down from a recovery peak three weeks ago (74.2%). Week-over-week declines in Indonesia were impacted by the Eid al-Fitr calendar.

The coronation of King Charles in London on 6 May did not have a noticeable impact on hotel performance across the United Kingdom. London ADR showed the greatest impact with a significant increase while occupancy gains were more muted.

Outside the 10 largest supply countries, a diverse set of countries posted occupancy above 78%, including the United Arab Emirates, Ireland, Senegal, Fiji, Puerto Rico, and Lithuania.

Final thoughts

Both U.S. and global results were impacted by normal seasonal slowing. Leisure travel remains strong and business/corporate and group travel continues to ramp-up as we see continuing gains in weekday occupancy, particularly in the largest markets. Likewise, the overall mix of travel appears to be shifting away from smaller markets and toward larger markets. Larger conventions and group events continue to have greater impact on a broader range of major markets. ADR remained firmly grounded with positive annual gains, although the rate of ADR and RevPAR growth is moderating and will continue to do so.

Looking ahead

Performance next week is expected to plateau as we navigate the period before the summer kickoff. College graduations will add to family travel, but this is expected to be offset by lessened leisure travel until families are freed from school calendars. As we move closer to the summer season, leisure travel will strengthen, and group will moderate. Business transient travel is expected to continue improving as is global performance.