Upward Trend in US Hotel Performance Indicates More Business Travel Than Expected

Weekly U.S. hotel performance trended upward for a second straight week, defying expectations of a seasonal slowdown compounded by an increase in COVID-19 hospitalizations, and pointing to better-than-expected business demand.

The gap between the latest weekly data and the comparable week in 2019 also narrowed slightly in some key performance metrics.

According to data from STR, CoStar’s hospitality analytics firm, U.S. hotel industry revenue per available room, on a total-room-inventory basis that accounts for temporarily closed hotels, for the week ending Sept. 25 was 84.8% of what it was during the comparable week in 2019. That index increased by one point from the previous week, meaning it was 1% closer to the 2019 level. The week-over-week gain was evenly split between occupancy and average daily rate, with 2019 indexes for both growing by about half of a percentage point.

For the 16th consecutive week, total-room-inventory RevPAR remained in the “recovery” category, which STR’s “Market Recovery Monitor” defines as indexing above 80 but below 100 compared to the same week in 2019.

The percentage of markets at “peak,” with an index to 2019 above 100, increased to 51% from 49% the week prior. Another 33% of markets were in “recovery,” unchanged from the previous week. Three markets — San Francisco, San Jose and New York City — were in STR’s “depression” category, with an index to 2019 that was below 50.

U.S. hotel occupancy for the week advanced to 63.2%, up 0.3 points from the previous and 89% of the comparable level from 2019. During the summer, from the week of Memorial Day to the week of Labor Day, occupancy averaged 66.1% and 92% of 2019’s levels. For the week ending Sept. 25, occupancy growth was led by weekend demand gains, which accounted for 81% of the week’s total demand growth. Weekday occupancy also rose but only slightly.

More than 62% of all hotels reported weekly occupancy above 60% during the week, which was a bit more than in the previous week. On a total-room-inventory basis, weekly occupancy was 60.9%. A little more than 50,000 rooms are temporarily closed in the U.S., also up slightly from the previous week.

On a 28-day moving average, which smooths out the impacts of seasonality, the total-room-inventory RevPAR index to 2019 is down two points. That means the RevPAR gap between 2021 and 2019 has widened by 2% on average over the past month. That has been driven mostly by a decline in rates from all-time highs in the summer, when ADR beat 2019 levels for several weeks, as the ADR index to 2019 fell by 1.7% over the 28-day period.

On a weekly basis, U.S. hotel industry ADR was up 1.9% from the previous week — the largest gain of the past nine weeks, mostly attributable to higher weekday rates. The week prior, the weekend was mostly responsible for growth in revenue and ADR.What the Data Says About Business Travel

This and the week-over-week gains, when moderate to sharp declines were expected, point to an increase in business travel and hotel demand to make up for some of the loss in summer leisure. Most industry observers expected a moderate to sharp performance decrease in the weeks after Labor Day given the seasonal return to in-person schooling as well as the increase in COVID-19 hospitalizations and a low volume of business travel.

Greater demand for hotels in the 25 largest U.S. hotel markets also is an indicator of business travel returning.

Hotel occupancy in the top 25 markets increased for a second consecutive week, rising to 62%, up 1.4 points from the previous week. The increase was driven by weekdays, which accounted for 59% of the weekly demand gain. Weekday demand growth was spread across all days, with the largest increases on Wednesday and Thursday.

Orlando and New York accounted for two-thirds of the weekday demand rise posted by the top 25. Boston, Washington, D.C., and Phoenix were among markets that reported weekday demand gains, while Chicago, Detroit and Atlanta lost weekday demand. Thirteen of the top 25 markets reported weekday demand that was at least 80% of what it was in the comparable week of 2019, and 51% of hotels in top 25 markets had weekday occupancy that was 60% or more of 2019 levels. The percentage of hotels with occupancy at 60% of 2019 levels increased by one point from the previous week.

Weekly hotel ADR in the top 25 markets grew 4.5% week-to-week, with all but eight of the markets reporting weekly rate growth. The greatest gains were recorded in Boston (+16%) and New York City (+11%). ADR in 19 of the major markets was 90% or more of 2019 levels, with 10 markets reporting ADR higher than what it was two years ago. Miami’s ADR was 19% higher than it was in the comparable 2019 week. Top 25 weekday ADR rose a bit more (+4.8%), led by New York City (+17%) and Washington, D.C., (+11%).

Group hotels in the top 25 also showed an improvement as 37% reported weekday occupancy above 60%, compared to 33% of group hotels a week ago. Group demand in the luxury and upper-upscale classes grew 5.7% week over week, which was the sixth consecutive weekly gain and the highest weekly demand of the past 81 weeks. Group ADR skyrocketed as well, increasing almost $16 from the previous week to $214. This was the first week that group ADR exceeded $200 since the start of the pandemic and the highest group ADR since February 2020.

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.