Countries included: United States, United Kingdom, Indonesia, Spain, China, Germany, Guatemala, Jamaica, Bahamas, Belgium, Luxembourg, Switzerland, Croatia and Switzerland
U.S. Performance
Coming off a strong week that aligned with the apex of Spring Break travel, the U.S. hotel industry throttled down during the week ending 25 March 2023. Performance indicators fell week over week (WoW), but some volatility is normal and in line with previous years given the current season. Based on historical patterns, we expect the next surge in performance to occur in the week leading into Easter Sunday as family/vacation-oriented travel gains steam.
U.S. hotel occupancy dropped to 64.9%, down from the year-to-date peak of 67.5% in the previous week. Despite the downshift, occupancy was still the second-best weekly level since late-October 2022. Occupancy also decreased 0.4 percentage points (ppts) from 65.3% a year ago. We do not believe the decrease is a sign of impending weakness but rather a return to normality given that last’s year’s leisure travel was overly robust post-Omicron.
Supporting that view, room demand totaled 25.2 million rooms, the fourth highest for this particular week since 2000 and nearly equal to last year’s level despite falling more than one million rooms week over week. The highest level ever achieved for the week occurred in 2019 when 26 million rooms were sold.
Average daily rate (ADR) also fell from the prior week’s YTD peak (US$167) to US$159, which still places the week as second best in 2023. ADR grew US$7 (+4.6%) YoY, which is slightly off the recent 6% pace of inflation.
Revenue per available room (RevPAR) was US$103, down 8.7% WoW and 4.1% higher than a year ago. Adjusting for inflation, real RevPAR reached US$86 as compared to US$94 a week prior.
Coming off a strong week, the Top 25 Markets saw a 3.2ppt decline in occupancy to 72.3%. That decline was consistent with historical weekly performance patterns as demand/occupancy normally recedes after peaking with Spring Break. Weekday (Mon-Wed) occupancy was 72.1% compared to 69.4% last year, which indicates that weekday business travel still maintained its recovery footing in the largest markets. Still, it is worth noting that there was a sizable 8ppt gap in weekday occupancy compared to 2019 (80.1%). Weekend (Fri-Sat) occupancy (78.8%) in Top 25 Markets was closer to the 2019 comp (82.7%) on the continued strength of leisure travel. Other notable performance items included:
- While the WoW demand decrease was nearly equally distributed between the Top 25 and all other markets, demand was up YoY in the Top 25 Markets and down elsewhere.
- Weekly demand in four of the Top 25 Markets was the highest for this particular week since 2000, when STR began benchmarking daily data. Nashville led in growth by selling 17.5% more rooms, but that gain was offset by the market’s 21.4% increase in room supply. Other markets showing weekly demand surpluses included Dallas, Boston, and Miami.
- ADR across the Top 25 Markets (US$190) increased 6.9% YoY. Only three large markets had YoY ADR declines—Miami, Los Angeles, and New Orleans.
- Top 25 RevPAR (US$137) grew 7.7% from the matching week last year, with weekday (Mon-Wed) RevPAR increasing 13.4% to US$137. In comparison, weekend RevPAR (US$156) rose a restrained 2.2%. Overall, 20 of the Top 25 Markets indexed higher than the same week in 2019. Chicago led the week among large markets with RevPAR 25% better than 2019.
- Outside the Top 25 Markets, weekday occupancy (59.7%) remained generally stable relative to last year which, given the substantial gains seen in the prior two years, is not concerning. Also, weekend occupancy in non-Top 25 Markets (70.5%) remained roughly 2ppts below last year, which can be an indication of slowing non-urban travel from prior peaks.
Seven of the 167 STR-defined U.S. markets reported occupancy above 80%, down from 19 markets the prior week. The Florida Keys (85.9%) and Palm Beach (84.0%) led in occupancy, while another 31 markets saw the metric between 70% and 80%. Overall, 101 markets (down from 108 the previous week) reported occupancy above 60%.
Other notable market insights:
- San Francisco’s RevPAR of US$200 was only the fifth time in the pandemic-era that the market hit that elite bar. The last US$200+ RevPAR week in San Francisco occurred in mid-January this year. The two solid RevPAR weeks early in 2023 provide early indication that the market is back on the playing field after being sidelined for much of 2021-22.
- Double-digit annual RevPAR growth, which is an indication of vigorous recovery, occurred in 10 of the Top 25 markets and 100 of 167 U.S. markets overall.
- Resort RevPAR is slowing with the week’s result down 6.8% YoY versus all other location types (+7.4%). The decrease among resorts was driven by both occupancy (-3.2ppts) and ADR (-2.6%). A closer look revealed that the decline was centered in markets outside of the Top 25, where resort RevPAR fell 12.1% versus -2.9% in the Top 25 Markets. Resorts in the Top 25 Markets have seen better performance since the beginning of the year, whereas resorts in non-Top 25 Markets have posted year-over-year RevPAR decreases for the past five weeks, including the steepest decline in the most recent period.
Global Performance
Global hotel occupancy fell 1.6ppts week over week to 65.8%. That combined with a 1.2% dip in ADR (US$131) led to a 3.6% drop in RevPAR (US$86). As compared to last year, occupancy was up 12ppts with ADR increasing 17.1% and RevPAR growing 44%. This was the first time this year that RevPAR growth was less than 50% YoY.
Among the 10 largest countries based on supply, the United Kingdom retook the lead with an occupancy of 75.9% —Japan was only a fraction of a percent behind. Indonesia dropped from the top occupancy spot to the bottom of the top 10 due to the start of Ramadan, which began 22 March. A shift in the Ramadan calendar (Ramadan did not begin until 1 April in 2022) also contributed to Indonesia being the only top country to slip below its occupancy comp from last year.
Spain and China both held strong with occupancies at or above 70%. Occupancy in China has now grown by several points each week since mid-March and shows no signs of slowing down with the most recent week’s result the highest since mid-July 2021. Germany had held the longest sustained growth in occupancy with a streak of six weeks, but that ended with a fractional dip in demand. Now, the U.K. leads the top 10 countries in that category, with three weeks of sustained occupancy growth.
Elsewhere, hotel occupancies fell in more countries than it grew. Guatemala topped the list for global occupancies at 81.4%, and Jamaica and the Bahamas remained above the 80% threshold as well. Only four countries have posted four or more consecutive weeks of week-on-week occupancy growth: Belgium, Luxembourg, Croatia, and Switzerland, which leads the world with seven consecutive weeks of growth.
Final thoughts
The week’s decrease in U.S. indicators followed a consistent historical pattern of slower performance in the period following peak spring break travel. Weekly indicators still placed second best so far in 2023. Globally, indicators also showed a small but not unexpected decline as markets experienced their own seasonal transitions along with the annual religious observance of Ramadan, which contributed to reduced travel in Islamic countries. As we officially beginning the spring season in the northern hemisphere, the past week’s performance provides us continued reason to be optimistic about the weeks ahead.
Looking ahead
U.S. industry indicators are expected to remain on their recovery trajectory for the remainder of the spring break season. We expect a slight week-on-week ramp-up in the week ending 1 April followed by larger week-on-week increases in the week ending 8 April as family travel picks up in the days leading into Easter. More of that travel will occur in larger markets than last year. This is counterbalanced by an expectation that business along with group bookings will start to slow we close in on Easter Sunday. Taken as a whole, net weekly demand/occupancy growth is expected to remain solidly in positive territory. Outside the U.S., the year-over-year comparables will strengthen given the later recovery period along with a more favorable comparison to the Ramadan period of last year.
