Market Recovery Monitor – September 10, 2022

Based on the most recent week of data (September 4-10, 2022) and adjusting for a shift in the holiday calendar, the US 3-day Labor Day weekend (Friday-Sunday) was the second-best behind 2021. For the three-day period 12.1 million rooms were sold, down 27,000 from 2021 and up 79,000 from 2018, which was the previous Labor Day weekend record prior to last year. Additionally, Wednesday through Saturday, the industry saw its highest demand for the days after Labor Day. Despite a solid end to Labor Day, total weekly room demand (WoW) fell 1.9% week-on-week as the industry continued its seasonal slowdown. However, the week-to-week decline was significantly smaller than in the years prior to the pandemic. Weekly occupancy hit 61.7%, down from 62.8% the previous week. The nominal average daily rate (ADR) fell 0.5% WoW to $147, up 15.2% from a year ago. Weekly nominal revenue per available room (RevPAR) declined 2.3% WoW to $91, for the third consecutive week below $100, but up 24% from 2021. Taking into account the shift to the Holidays both real ADR and RevPAR were above 2019 (+). 5% or +6%).

Source: ST
Source: ST

The days after the Labor Day holiday adjusted for the shift over the years had the highest demand for these days after the holiday dating back to 2000. In fact, when you compare this to the previous 20 workday-to-end year periods, Labor Day Saturday 2022 was the third best. This continues to point to the strength of leisure demand despite high inflation, market turmoil and heightened economic uncertainty.

Business travel also seems to have recovered somewhat after the holidays. Occupancy in the top 25 midweek markets (Wednesday and Thursday) rose to 65% from 61% the previous week. Occupancy over those two days ranged from 89% in New York to 40% in New Orleans. Boston, Denver, Los Angeles, San Diego and San Francisco all reported midweek occupancy, and occupancy was up in all but nine of the top 25 markets. For the full week, occupancy in the top 25 markets fell 1.3 percentage points WoW to 64% given normal weakness seen on the actual holiday and the day after (Monday and Tuesday).

Like the top 25, central business districts (CBDs) saw occupancy growth during the week, hitting 64% after falling to 56% ahead of the Labor Day holiday. Occupancy in Boston CBD rose to 90%, up 10 percentage points WoW. The New York Financial District also posted strong gains (+17 percentage points WoW) as occupancy reached nearly 90%. Denver, Nashville, Seattle and San Diego all reported weekday occupancy above 70%. However, not every CBD saw solid midweek occupancy, with New Orleans (34%) and Atlanta (45%) bringing up the rear. In six of the 20 CBDs, midweek occupancy dropped week-on-week. For the full week, CBD utilization reached 62%, down 0.7 percentage points WoW.

Part of the midweek gain was an increase in group business, where midweek demand hit a six-week high. Group demand in Boston, Los Angeles, New York, Orlando, Phoenix, San Diego and Washington, DC saw significant gains week-over-week. More importantly, these markets saw the highest intraweek group demand for the past five weeks, which bodes well for the remainder of the conference season.

Among the chain scales, midweek utilization also increased from week to week. Adjusted for the holiday shift, lower tier chain scales reported higher midweek utilization in 2022 compared to 2019, with the upper tier lagging behind. Upper Upscale reported a weekday occupancy of 64%, down 3 percentage points from the comparable week in 2019. Upscale, a favorite of transient business travelers, reported a weekday occupancy of 66%, -0.5 percentage points from 2019 .

Source: STSource: ST
Source: ST

Weekly nominal ADR in the top 25 markets showed a sharp increase, rising 2% WoW versus -2% WoW for all other markets. The top 25 was led by New York City (+19%), Nashville (+10%), Phoenix (+9%) and Washington, DC (+8%). However, without NYC, the top 25 nominal ADR would have been down 1.3% WoW.

Midweek nominal ADR brought an even larger gain for the top 25 markets, +9% WoW versus -0.4% for all other markets. Eight of the top 25 markets reported nominal ADR gains of over 10% midweek, led by NYC (+34%) and Washington, DC (+20%). Even excluding New York, the top 25 market ADRs were up midweek (+4% WoW). Year-over-year, the nominal midweek for the top 25 market ADRs is up 25%. Weekly real (inflation-adjusted) ADR rose 16% year-on-year.

Nominal weekly RevPAR was slightly positive (0.2%) for the top 25 markets, compared to a -4% decline outside of these markets. Like ADR, the metric was driven by New York City (+25% WoW). Nashville also saw strong growth (+13% WoW).

Mid-week nominal RevPAR for the top 25 markets showed significant week-to-week growth (+17%), again led by New York (+53% WoW) and 12 other markets reporting RevPAR growth of more than 10% WoW reported midweek. Year-over-year growth was also impressive, up 48% for the entire top 25 with a 37% year-over-year increase in real RevPAR.

In the last 28 days and adjusted for inflation, 46% of the US markets were up “Summit” RevPAR (real RevPAR above 2019), while another 48% were in recovery (real RevPAR between 80% and 100% from 2019).

Source: STSource: ST
Source: ST
Source: STSource: ST
Source: ST

Around the world

Outside the US, occupancy increased 2.1 percentage points WoW to 63.8%. This was 7.8 percentage points off the same week in 2019. ADR was up 4.2% WoW to $136, up 11.4% from 2019 levels. Thirty of the countries tracked weekly saw a drop in occupancy from week to week.

Source: STSource: ST
Source: ST

Italy reported a 13.1 percentage point increase in occupancy compared to the previous week coupled with a 14.5% WoW increase in ADR. This was driven by the Italian Grand Prix, held in Milan. China saw occupancy fall to 48.2%, down 4.5 percentage points WoW due to COVID-related restrictions in Guizhou, Guangzhou and Shenzhen. Hamburg hosted the SMM 2022, an international trade fair for the maritime industry. While occupancy remained flat on WoW, ADR increased by 30% from the previous week.

Ireland and Portugal reported the highest occupancy rates (88% and 84% respectively). Nonetheless, both fell 3.1 and 5.5 percentage points below 2019 levels, respectively. Northern Europe again recorded the highest occupancy rate (80.6%) of any subcontinent, up 4.7 percentage points from last week, with Northeast Asia recording the lowest (49.9%).

Source: STSource: ST
Source: ST

Over the past 28 days, inflation-adjusted, 18% of non-US markets remained in “recession” (real RevPAR indexed to 2019 between 50 and 80) and 2% in “depression” (real RevPAR indexed to 2019 below 50). .

Source: STSource: ST
Source: ST

big picture

This week was somewhat typical of the days after a big holiday. We were surprised and encouraged by the strong mid-week performance, which is our focus as we look for evidence of a solid decline led by the group’s pent-up demand. We remain optimistic on the US, but have growing concerns outside of the country amid revised weaker economic forecasts. The US economic outlook has also been downgraded, but we believe other factors (solid higher-income-led leisure demand and pent-up group demand) will mitigate the impact of a slowing economy.

About STR

STR provides best-in-class data benchmarking, analytics and market insights for the global hospitality industry. Founded in 1985, STR has a presence in 15 countries with North American headquarters in Hendersonville, Tennessee, international headquarters in London and 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. Visit str.com and costargroup.com for more information.

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