Market Recovery Monitor - 12 March 2022
Good occupancy abounds as spring blooms. U.S. hotel industry occupancy (63.2%) reached a 20-week high during 6-12 March 2022 with Spring Break driving growth even though it has yet to reach its apex. Along with robust leisure travel, business travel appears to be returning as well. Hotels saw the highest weekday (Monday-Wednesday) occupancy since the week ending 21 August 2021. A more important sign was seen in central business districts (CBDs) in STR’s Top 25 Markets, where weekday occupancy hit a pandemic-era high (57.9%). Average daily rate (ADR) also blossomed, reaching the second highest nominal level ever (US$144.68), behind the all-time high seen during the 2021 Christmas holiday week. Revenue per available room (RevPAR) followed, increasing 8.3% week over week.
Florida led the nation with the highest weekly occupancy (81.6%) by state, followed by Arizona (79.1%), which posted its highest occupancy since the start of the pandemic and its fifth highest weekly level dating back to 2019. Florida’s occupancy level was its second best of the pandemic-era after reaching a previous high-water mark two weeks prior. Not surprising, of the top 10 highest occupancy markets in the U.S., nine were in Florida led by the Florida Keys (89.5%). Orlando, while not in the top 10 during the week, reported the 14th highest occupancy as part of continued strong performance. Orlando has sold more than 2.3 million rooms over the past three weeks, the most for a three-week period in the market since late-February/early-March of 2020.
Other surprises this week included Salt Lake City (84.6%), which has been in the top 10 over the past two weeks and saw its highest occupancy since the start of the pandemic. Dallas (70.2%) also set a pandemic-era high this week. Eight other markets, including Austin (74.6%), Miami (84.1%), Phoenix (82.4%) and Tucson (81.9%) reported their second highest occupancy since March 2020. Overall, 35 of the 166 STR-defined U.S. markets saw occupancy surpass 70% this week, the most since mid-October 2021.
New York City continued to see growth as weekly occupancy reached 67.7%, which was the market’s highest since the Christmas holidays and 10th best since the start of the pandemic. Weekend occupancy soared to 77.4% after being below 70% since the start of the year. All New York submarkets reported occupancy above 70% over the weekend except Midtown East (67.2%). ADR for the city rose 7% from the week prior and by 9% over the weekend.
On a submarket level, 18 of the 654 STR-defined U.S. submarkets showed their highest occupancy since the start of the pandemic. Several of the submarkets were in airport locations, which likely benefited from weather disruptions over the weekend. Overall, more than a quarter of submarkets saw weekly occupancy top 70%.
Group demand also reached a pandemic-era high with luxury and upper upscale class hotels selling 1.6 million rooms in the week, which was 81% of the comparable 2019 volume. Weekday group demand was also the highest since early March 2020. We are particularly encouraged by the demand seen on Tuesday and Wednesday, which was nearly 80% of the 2019 comparable. Looking at group demand by day of week over the past six weeks, weekdays (Monday-Wednesday) have averaged 59% of the volume in the same six weeks of 2019 with shoulder days (Sunday & Thursday) at 66%. Weekend group demand has done the best and is the closest to reaching recovery at 77% of 2019’s volume. Top 25 Market group demand is also on the rise, reaching pandemic-era highs on both weekdays and shoulder days.
Weekly ADR increased 4.7% with the weekday rate rising by the same amount and the weekend seeing growth of 5.4%. Hotels in the Top 25 Markets reported a 5% gain in weekly ADR with a similar improvement for weekdays and slightly more on the weekend. Compared with the same week in 2019, the week’s ADR was 8% higher. ADR has now been outpacing 2019 comparables for the past five weeks. Adjusting for inflation, weekly ADR was four percent lower than in 2019.
Twelve markets reported their highest ADR since the start of the pandemic including Tampa, Jacksonville, Salt Lake City, Phoenix, Savannah, San Antonio, and Memphis. The highest ADR in the country was in the Florida Keys (US$592) followed by Maui (US$575). Maui has seen rates above US$500 for the past 12 weeks, while the Florida Keys has been at that level since the beginning of the year. Weekend ADR in both those markets was above US$600. The number of hotels with an ADR above US$1,000 remained elevated as compared with 2019. Overall, 79 hotels were at or above that level as compared to 65 in the previous week.
Weekly RevPAR (US$91.45) achieved a 30-week high and was 97% of the 2019 comparable. On an inflation-adjusted basis, RevPAR was 13% lower than in 2019, but both the nominal and real levels remained in STR’s “Recovery” category as RevPAR indexed to 2019 was between 80 and 100. Even though RevPAR showed solid gains, the number of markets at “Peak” (RevPAR indexed to 2019 above 100) fell from 100 in the fortnight to 90 this past week. Looking back, since June 2021, nine markets have had RevPAR above their 2019 levels for the past 41 weeks. These markets were mostly rural, like South Carolina Area, Louisiana South, etc., but did include Sarasota. Another 10 markets have surpassed 2019 in 40 of the past 41 weeks, including the Florida Keys, Fort Myers, and Hawaii/Kauai.
On a 28-day moving total basis, 61% of the 166 STR-defined markets were at “Peak” RevPAR, which is the most of the past eight weeks. Another 30% were in “Recovery.”
Around the Globe
Global occupancy increased slightly to 50.8% but ADR declined 1.5% as did RevPAR (-0.7%). More than a third of the 104 countries tracked on a weekly basis saw a drop in demand this week with the most impactful decrease coming from China, as new COVID restrictions were put in place to combat the latest outbreak. Demand in China was down one million room nights versus the previous week with occupancy falling to 44%. While occupancy fell 1.2 percentage points for the week, the United Arab Emirates (85%) continued to have the highest occupancy in the world as it has over the past four weeks. Barbados and Puerto Rico followed with occupancy above 78%. Overall, occupancy in the Caribbean was strong 65.4%, and it has been at or above that level for the past four weeks. The Middle East (73.8%) had the highest occupancy of any subcontinent with Western Europe with the lowest (43.6%).
Poland, which has been housing refugees from Ukraine, saw a sharp increase in occupancy, up 11.6 percentage points to 72.2%, its highest level since the start of the pandemic.
Over the past 28 days, most (43%) non-U.S. markets remained in “Recession” (RevPAR indexed to 2019 between 50 and 80) with another 25% in “Depression” (RevPAR indexed to 2019 under 50). Both percentages saw little movement in the past two weeks.
Big Picture
U.S. Spring Break is in full swing as evidenced by the solid performance of recent weeks. We expect to see even higher U.S. occupancy for the week of 13-19 March with a higher number of schools out for the annual ritual, according to STR’s School Break report. A year ago, spring occupancy peaked at 59.5% during the week of 4-10 April. Over the past four weeks, occupancy has averaged 11 points higher than a year ago. Thus, we expect that performance will remain robust through the season as we head into the summer. Of course, increased geopolitical uncertainty, inflation, and a rise of a new COVID variant in Europe is tempering our unbridled optimism.
About STR
STR provides premium data benchmarking, analytics and marketplace insights for the global hospitality industry. Founded in 1985, STR maintains a presence in 15 countries with a corporate North American headquarters in Hendersonville, Tennessee, an international headquarters in London, and an Asia Pacific headquarters in Singapore. STR was acquired in October 2019 by CoStar Group, Inc. (NASDAQ: CSGP), the leading provider of commercial real estate information, analytics and online marketplaces. For more information, please visit str.com and costargroup.com.
