US Hotel Performance Unlikely To Continue Upward Trajectory Post-Summer

The trajectory of U.S. hotel performance for the first half of 2021 will not continue through the second half, but the recovery is clearly underway, according to Jan Freitag, national director for hospitality analytics at CoStar Group.

The latest monthly data from STR, CoStar’s hospitality analytics firm, shows U.S. hotel revenue per available room for June was down just 13% from the same period in 2019, which is considered pre-pandemic “normal.” In January, RevPAR was still basically half of what it was in 2019.

“I received the question if analysts should just draw a straight line between the January and the June results and if that implied that we could return to 2019 results already by the late fall of 2021. But let me be clear: that will not be the case,” Freitag said in a video presentation on the monthly results.

“Keep in mind that the current recovery is driven by leisure demand but that after Labor Day, when children are back in school in person, we will see a drop-off in demand and the high prices that these leisure travelers are paying.”

Still, the summer leisure season has been a balm for the U.S. hotel industry, which suffered an unprecedented drop in demand due to the COVID-19 pandemic.

In June, for the first time in 19 months, U.S. hotels sold more than 100 million rooms, and across the U.S., hotel occupancy averaged 66% — driven by leisure destinations such as the Florida Keys, where occupancy was 90%, and dragged down by urban locations dependent on business group demand, which is still anemic.

“The occupancy performance has been healthy,” Freitag said. “However, we are still a few points below the normal three-year average of summer occupancies that historically have been in the 73% range in June and July. I doubt that we will hit those results this year.”

Group demand for June actually increased, with more than 3 million group rooms sold, but that demand shifted from midweek to the weekends, indicating that these are leisure groups — including weddings and family reunions — and not business travelers.

“I, for one, do not think this pattern will hold after Labor Day, but for now, leisure group meetings are happening, and hoteliers are able to benefit,” Freitag said.

Hotels in leisure destinations have also been able to drive rates to take “full advantage of the increases in vaccinated summer travelers and their pent-up demand and pent-up spending power,” Freitag said.

U.S. hotel industry average daily rate for June was just “$3 below the three-year average of 2017 through 2019,” Freitag noted.

"This is rather a barbell type-situation and very high-end and lower-end classes have surpassed 2019 results, but upper-upscale and upscale hotels have not yet,” he said.

“Luxury hotels today are charging $40 more than they did two years ago and … for economy-type properties, the ADR increase is around $3. But the lack of corporate transit rates is clearly visible in the upper-upscale hotels, which are still $13 cheaper than they were in 2019.”

For more of Freitag’s insights into the monthly hotel data, watch the video here.

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.