Market Recovery Monitor - 9 July 2022
As expected, based on previous occurrences of a Sunday or Monday Fourth of July, U.S. hotel demand and occupancy fell for the week ending 9 July 2022. Occupancy came in at 63.3%, which was lowest level since early March as demand dropped by 1.5 million room nights. Besides falling week on week, occupancy was also down (-3.7 percentage points) versus the comparable week in 2021, which was the country’s first year-over-year decline in the metric since early March 2021. Like last week, we are not too concerned with the drop in demand and/or occupancy as similar declines have been seen five times since 2000 when the Fourth of July fell on Monday or was observed as a federal holiday on the first day of the week. The only time both measures have not fallen was last year when pent-up demand from COVID isolation drove the three-day holiday weekend to the highest level since STR began tracking weekly performance in 2000. Nominal average daily rate (ADR) was flat week over week, remaining at US$154, which was the sixth highest level since weekly records began, 9% above a year ago and 16% better than the matching week of 2019. Nominal revenue per available room (RevPAR) declined 5.9% to US$97, which was 1% below the value seen in 2019 and 3% higher than a year ago.
Looking at the three-day Fourth of July weekend, this year’s was the third best (when compared to the six others since 2000) in terms of total demand. Only 2016 and last year were higher. More than 11.5 million rooms were sold this year as compared to 11.7 million last year and 11.5 in 2016. You could say that demand this year was flat from 2016, but in actual numbers, 2016 was higher. However, this year’s demand decrease was the largest of the seven as nearly 91,000 more rooms were lost this week than in 2016. Occupancy (68.7%) was also lower and near the bottom when compared with other occurrences, which ranged from 67% in 2010 to 75% in 2016, but some of the difference is due to more supply. As compared with 2016, supply is 9% higher, meaning this year’s occupancy would have been nearly identical to 2016 if supply had not increased. A year ago, occupancy reached 71% during the three-day holiday period.
By day of week, Sunday’s room demand was the second highest of the seven times since 2000 that we have celebrated the Fourth of July with a Monday holiday. The highest demand recorded for a Fourth of July holiday Sunday occurred last year. As compared with the 1,176 Sundays that preceded this past Sunday, 2022 produced the 11th highest demand.
As is normal, demand declined on Monday (Fourth of July) and Tuesday with half of the weekly decrease coming on Monday. Room demand began growing again on Thursday and into the weekend. Weekend occupancy bounced back to 74%, which was also on the low side compared with the seven other times it was preceded by a three-day Fourth of July weekend.
The demand decrease was widespread with 135 of the 166 STR-defined markets reporting a drop. Most of the decrease, however, was centered in the Top 25 Markets, which accounted for nearly half of the weekly demand decline as business and group travel came to a halt for the holiday. The highest weekly occupancy was seen in Oahu (86%), which was a pandemic-era high for the market. Only three markets had occupancy above 80% for the week (Oahu, Alaska, and Myrtle Beach). Among submarkets, Panama City, FL reported the highest occupancy (87.4%) followed by Waikiki (86.8%) and San Diego South/East (84%). Not surprising, central business districts (CBDs) had some of the lowest occupancies for the week and collectively reached just 59%.
While nominal ADR was flat week over week, it was still the sixth highest level since 2000. Twenty-four markets, mostly rural and leisure-focused, reported their highest nominal ADR since weekly tracking began in 2000, including San Diego, Norfolk/Virginia Beach, Orange County (Anaheim), and Harrisburg, PA. On a property-level, 44% of reporting hotels had a nominal ADR that was 16% greater over the past two weeks than in the same two weeks of 2019. Keep in mind that inflation since 2019 is running about 14%, so these hotels are well above the rate of inflation. Only 15% of hotels had a nominal ADR that was below the level they had in 2019. Additionally, 50 hotels reported ADR above US$1,000 over the past two weeks as compared to only 15 in 2019. Using a straight average, these 50 hotels have seen their ADR rise by 68% versus the same period in 2019. Real (inflation-adjusted) ADR remained above 2019 for a fifth consecutive week with real ADR one percent higher than what was seen three years ago.
Nominal RevPAR as compared to the same week in 2019 was down one percent. This was only the second of the past 17 weeks when nominal RevPAR was lower than in 2019. Real RevPAR was 14% less than in 2019. A week prior, real RevPAR was seven percent higher, but that was mostly due to the shift in the Fourth of July holiday.
Even with the decrease in RevPAR over the past two weeks, most markets (90%) have 28-day nominal RevPAR above where it was in the same period of 2019, which we refer as “peak” (RevPAR above 2019). Using real RevPAR, 45% of markets are above 2019 over the past 28 days. The percentage of markets at “peak” on a rolling 28-day average has been somewhat stable for the past 10 weeks. Additionally, most other markets have real RevPAR that is in the “recovery” zone (RevPAR indexed to 2019 between 80 and 100).
Around the Globe
After a small dip in the previous week, global occupancy, excluding the U.S., advanced to 65%, which was second highest level since the start of the pandemic. Nominal ADR rose to US$149, up 3.5% week on week. With both occupancy and ADR rising, weekly nominal RevPAR increased 4.3% to US$97, which was the highest nominal RevPAR of the pandemic-era and 7% higher than in 2019. Real RevPAR is estimated to be 10% below 2019.
Six countries, including the United Kingdom and Portugal, reported occupancy above 80% during the week. Additionally, Australia, Fiji and Portugal saw occupancy reach a pandemic-era high. Among the 10 largest countries based on supply, four (France, Germany, Mexico, and the U.K.) reported demand at or above 2019’s level. China’s occupancy advanced but remained the lowest of the 10 largest countries with occupancy of 60.6%. While the lowest of its peer group, the level was China’s highest of the year so far with occupancy increasing for the past five weeks.
Eight of the 10 markets with the highest demand gains for the week were in China, with Beijing seeing the largest demand growth of any market. The highest weekly occupancy was reported in ACT & Canberra Area, Australia (91%) followed by Edinburgh (88%) and London (87%). On the flip side, Ukraine (21%), Shanghai (34%), and Macau (39%) reported the lowest weekly occupancies.
Sixty-four percent of markets reported weekly nominal RevPAR above the 2019 comparable. This was the highest percentage since the start of the pandemic. In terms of real RevPAR, 42% of non-U.S. markets were at “peak” for the week, also the highest percentage of the pandemic-era, and another 36% were in “recovery.”
Big Picture
With the holiday behind us, U.S. room demand should rebound to the levels seen prior to the Fourth of July. Historically, week 30 (13-23 July this year) produces the highest weekly demand of the year. If demand doesn’t rise, then we should be concerned, but indications are that we will see solid demand for the remainder of the summer and into the fall. As noted in recent Wall Street Journal coverage, Delta Airlines sees the travel resurgence expanding into the fall and winter with business travelers expected to step into the demand void when summer vacation season ends.
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.
