STR Weekly Insights: 4-10 June 2023

Analysis by Isaac Collazo and Will Anns

Countries included: United States, China, Japan, United Kingdom, France, Indonesia, Malta, Czech Republic, Ireland, and Mexico.

U.S. Performance

U.S. hotel performance bounced back from its Memorial Day holiday lull with occupancy of 69.4%, up 7.8 percentage points (ppts) from the previous week. That level was down 1.1ppts from last year. Occupancy had averaged a 3.2ppt increase over 2022 during the first 11 weeks of the year, excluding the week that included New Year Day week, due to easy Omicron comparisons. Since then, occupancy has been 0.3ppts lower than a year ago. The average gap to 2019 has also widened, from 1.9ppts earlier in the year to 3.2ppts now. Looking further back, the most recent weekly occupancy was in the middle of the pack (10th highest,) versus the matching weeks over the past 24 years. The highest occupancy ever recorded for the week was 73.1% in 2017.

• For a seventh consecutive week, New York City posted the nation’s highest weekly occupancy (87.7%). Note, hotels open strictly for housing immigrants have been excluded from all performance calculations.
• Eight markets reported occupancy above 80%, including Boston and Seattle. Washington, D.C. was just under that level with occupancy rising by more than 4.5ppts YoY.
• The largest weekly occupancy gain was seen in Oahu, where occupancy increased 9.7ppts year over year (YoY) to 84.8%. While Hawaii/Kauai and Maui have seen nearly constant YoY occupancy declines for the past 16 weeks, Oahu has been on the increase with gains in 13 of those 16 weeks.

As has been the case for most of this year, the largest occupancy losses were seen Friday and Saturday. However, for the most recent week, Sunday and Thursday (shoulder days) also showed a noticeable drop.

• Weekend occupancy was down 2.5ppts across the industry with both Friday and Saturday producing the same level of decrease.
• 71% of all markets reported a decline in weekend occupancy with eight reporting decreases of more than 10ppts.
• Top 25 Markets saw weekend occupancy drop 3.1ppts with large decreases seen in Minneapolis (-11ppts), Atlanta (10.6ppts) and others. Outside the Top 25, weekend occupancy was down 2.2ppts.

At 69.7%, weekday (Monday – Wednesday) occupancy was basically flat compared to last year (-0.1ppts) and at its highest level of the year so far. Top 25 weekday occupancy reached 74.6% with Boston and New York above 90%. Five other markets, including Denver, Seattle, and Washington, D.C., reported weekday occupancy above 80%.

• Weekday occupancy in Boston and Washington, D.C. was at its highest point since prior to the pandemic.  
• Weekday occupancy in central business districts (CBDs) reached 77.7%, but the gap to 2019 remained significant as weekday occupancy then was 87%.
• Weekday occupancy outside the Top 25 was 67.1% also flat to last year.

As expected, group demand among luxury and upper upscale returned and reached its highest level of the past six weeks. Oahu saw the largest year-on-year gain in group demand. Nashville, New York City, Philadelphia, and Washington, D.C. also saw solid group gains. Weekly Luxury and Upper Upscale occupancy jumped above 70%, but the highest occupancy among the chain scales was Upscale (76%). Midscale and Economy hotels continued to see declining occupancy with the latter falling by more than 3ppts YoY.

For a second consecutive week, revenue per available room (RevPAR) fell (-1.2%) YoY driven by the decrease in occupancy. Average daily rate (ADR) growth (+0.5%) was insufficient to offset the occupancy decline. Shoulder and weekend days saw the largest RevPAR decreases (-1.4%, -4.3%, respectively) while the measure was up on weekdays (+1.6%) driven by ADR growth of 1.7%. When adjusting for inflation, weekly real RevPAR was down 5.5% YoY and has fallen for the past five weeks. Real ADR was also down (-3.9%) as it too has been declining for five consecutive weeks.

• Top 25 RevPAR fell 2.4% YoY with real RevPAR down 6.6%. This was only the second time that nominal RevPAR has fallen since the recovery began. Both declines have occurred this year.
• Non-Top 25 RevPAR was down 0.3% YoY. Real RevPAR decreased 4.7% YoY.

Global Performance

Global occupancy (excluding the U.S.) was 68.5%, which was the fourth highest level since March 2020 and up 6.5ppts YoY. Weekly ADR was up 16.6% YoY to US$152, the second highest nominal level since the start of the pandemic. With strong growth in both occupancy and ADR, RevPAR achieved an all-time high of US$104, up 28.9% YoY.

Occupancy in the top 10 countries, based on total supply, achieved 70.3% (+8.6ppts YoY). Asia remained a strong contributor to the occupancy gains with China leading at 16.3ppts YoY, followed by Japan (+7.8ppts) and Indonesia (+6.6ppts).

• The United Kingdom again had the highest occupancy (80.8%) among the top 10 countries.
• Occupancy in France gained 5.5 ppts to 79.5%, benefiting from the spring bank holiday and summer travel.
• Top 10 ADR gained 12.8% YoY to US$143. Japan had the highest ADR gain (+81.2%) with China, Indonesia, and Germany seeing growth of more than 20% YoY.
• RevPAR in the top 10 increased 28.5% to US$100. RevPAR in Japan was up 104.5% YoY with China’s increasing by 66.1%. Mexico was the only country in the top 10 to post a RevPAR decrease (-8.9%).

Outside of the top 10, Malta showed an impressive increase of 12.9ppts YoY, reaching 83.2% occupancy. The Czech Republic saw growth of 14.1ppts YoY, attaining a level of 81.7%. Ireland maintained the world’s highest occupancy (86.1%), up 1.3ppts YoY.

Final thoughts

U.S. occupancy continued to fall short from last year’s level. Some of the challenges include changes in travel patterns, from resorts to Top 25 markets and/or international outbound. We don’t believe the occupancy challenges are a result of the increased economic uncertainty as air travel, based on TSA screenings, was up by nearly 10% YoY and has been up since April on a 7-day moving average basis. We also continue to observe a slowing in ADR, but as we have suggested, that is likely a result of changes in demand from pure leisure to a more normal mix of business transient, group and leisure. Outside of the U.S., the recovery remained in full swing.

Looking ahead

U.S. occupancy is expected to increase again in the week ending 17 June, heading to its annual apex, which should occur this year in the week ending 22 July. ADR growth is likely to remain somewhat muted as the demand mix normalizes. As a result, RevPAR is anticipated to be flat to slightly down as compared to last year. Global performance, excluding the U.S., is expected to see healthy growth over the next several weeks.