Analysis by M. Brian Riley
U.S. hotel performance produced an incremental gain during the four weeks ending 13 May, a period that falls in between the heavy, summer travel season and earlier year peaks that include solid leisure travel, improved demand from conventions and group bookings, and returning business travel in larger markets. At a market-level, New York City continued to hold down the top occupancy spot while markets like Boston, Washington, D.C. and Alaska joined the leaderboard.
Four-weeks ending 13 May 2023:
- Occupancy grew 1.4 percentage points (ppts) from the previous four weeks to 66.0%.
- Occupancy was up 0.4 ppts from the matching period in 2022.
- Occupancy remained down 3.1 ppts from the 2019 comparable of 69.1%.
While the rate of new rooms in construction has flattened since the pandemic, it is worth adding that long-term supply growth of 3.3% from the matched period in 2019 is playing into that percentage change against pre-pandemic times.
Leisure travel remains the primary driving force during the current phase of the recovery, as indicated by comparatively strong weekend performance compared to weekdays. Importantly though, the Top 25 Markets continue gaining occupancy on weekdays compared to last year although distinct deficits against 2019 remain in place in most large markets.
Outside of major markets, weekends continue to show narrow annual declines toward more “typical” pre-pandemic levels. Compared to last year, pent-up demand and excess savings have decreased. Likewise, persistent inflation, relatively flat wage growth and belt-tightening across select business sectors may potentially add constraints to improving hotel performance indicators.
The Top 25 Markets were led in occupancy by New York City (86.5%) which experienced a sharp 5.8 ppt gain from the prior four weeks. This bounce was driven by the market’s improved weekday (Mon-Wed) performance. Next were Las Vegas (78.4%, -1.1 ppts), Oahu (78.3%, +0.1 ppts), Washington, D.C. (77.1%, +2.7 ppts), and Boston (77.1%, +6.9 ppts). An indication of seasonal shifts, no Florida markets made it to this month’s “best-of” occupancy list while two markets (D.C. and Boston) made their first appearance on STR’s 2023 “bubble chart” leaderboard.
Only a single market from the Top 25 (Dallas) matched its 2019 occupancy level for the recent four weeks. However, a handful of the largest markets made major strides in improving their occupancy margins above this time last year, including Boston (+6.0 ppts year over year), New York City (+5.6 ppts YoY) and Washington, D.C. (+4.1 ppts YoY). Compared to our last monthly update, when six of the Top 25 Markets showed four-week/2019 occupancy shortfalls of 10 ppts or greater, only a single large market (San Francisco) ran a more extreme occupancy gap against the matched weeks of 2019.
In comparison, 57 of the 142 remaining STR-defined markets experienced occupancy gains above last year’s level, a sign of slowing pandemic-spurred-demand in secondary markets last spring. In total, 47 of 167 markets had better four-week average occupancy than 2019.
Gains in average daily rate (ADR) among Top 25 Markets present a more favorable pattern with all but three large markets seeing annual rate gains. Four of the better performing markets saw 8% or higher increases in ADR, well ahead of the recent pace of inflation. Las Vegas was one exception with its ADRs dropping 4.1% YoY, which may be a partial reflection of the market’s greater mix of group bookings. Overall, the general pace of annual ADR gains among Top 25 Markets has moderated from Q1 2023.
In terms of a revenue per available room (RevPAR), 21 of the Top 25 Markets experienced YoY gains for the matched period. New York City had the largest YoY RevPAR dollar gain, increasing $41 (+17.4%) to $274. While Las Vegas came in second place among large markets in occupancy, its YoY RevPAR declined to $134 from $140.
Outside of the Top 25 Markets, the Alaska market’s four-week 79.9% average occupancy led all others . This performance was notably higher than last year (+5.7 ppts) and sharply above 2019 (+9.9 ppts), a sign that rural demand remains a strong pull in select markets and gives some indication growing cruise travel. Next in line was the high-end Florida Keys hotel market (75.8%, -3.1 ppts YoY), which has remained a consistent leisure-driven highflyer, both in terms of occupancy and ADR. The Keys market was followed in occupancy by Charleston (75.0%, -2.4 ppts), Salt Lake City (73.3%, -0.7 ppts), Albuquerque (73.2%, -2.0 ppts).
Most small-to-medium sized markets saw substantial YoY gains in their nominal ADR (non-inflation adjusted). When combined with occupancy performance, 22 markets experienced RevPAR growth in the double-digits, down from 33 markets in our last monthly update. RevPAR overall grew in 100 markets beyond the Top 25, with growth matching/outpacing CPI-based inflation in roughly half of those gaining markets.