US hotel performance delivered an incremental gain during the four weeks ending May 13, a period that falls between the busy summer travel season and previous year’s peaks that include strong leisure travel , improved demand for convention and group bookings, and returning business travel in larger markets. At the market level, New York City continued to rank first in occupancy, while markets such as Boston, Washington, DC, and Alaska joined the rankings.
Four weeks ending May 13, 2023:
- Occupancy grew 1.4 percentage points (ppts) from the previous four weeks to 66.0%.
- Occupancy increased 0.4 percentage points from the comparison period in 2022.
- Occupancy remained 3.1 ppts below the 2019 comparable of 69.1%.
While the rate of new rooms being built has been flattened since the pandemic, it’s worth adding that long-term supply growth of 3.3% since the matched period in 2019 is influencing that percentage change compared to the pre-pandemic times.
Leisure travel remains the main driving force during the current phase of the recovery, as indicated by the comparatively strong performance of weekends compared to weekdays. However, it is important to note that the top 25 markets continue to gain weekday occupancy compared to last year, although distinctive deficits from 2019 remain in most large markets.
Outside of the main markets, weekends continue to show narrow annual declines towards more “typical” pre-pandemic levels. Compared to last year, pent-up demand and excess savings have decreased. Similarly, persistent inflation, relatively flat wage growth, and belt tightening in select business sectors can potentially add constraints to improve hotel performance indicators.
The top 25 markets were led in occupancy by New York City (86.5%), which saw a strong 5.8 ppt increase over the previous four weeks. This rebound was driven by the improved performance of the market during the week (Monday to Wednesday). It was followed by Las Vegas (78.4%, -1.1 ppts), Oahu (78.3%, +0.1 ppts), Washington, DC (77.1%, +2.7 ppts) and Boston (77 .1%, +6.9 ppts). In an indication of seasonal changes, no Florida markets made this month’s “best of” occupancy list, while two markets (DC and Boston) made their first appearance in STR’s 2023 “bubble chart” Positions table
Only a single Top 25 market (Dallas) has matched its 2019 occupancy level over the past four weeks. However, some of the largest markets made significant strides in improving their occupancy margins over this time last year, including Boston (+6.0 ppts year-over-year), New York City (+5.0 ppts year-over-year), .6 ppts year-over-year) and Washington, DC (+4.1 ppts). every year). Compared to our last monthly update, when six of the top 25 markets showed occupancy deficits of 10ppts or more in four weeks/2019, only one large market (San Francisco) had a more extreme occupancy gap compared to the equivalent weeks of 2019.
By comparison, 57 of the remaining 142 STR-defined markets saw occupancy gains above last year’s level, a sign of slowdown in demand triggered by the pandemic in secondary markets last spring. In total, 47 of 167 markets had a better four-week average occupancy than in 2019.
Average daily rate (ADR) gains among the top 25 markets show a more favorable pattern with all but three large markets experiencing annual rate gains. Four of the best performing markets saw increases of 8% or more in ADRs, well above the recent pace of inflation. Las Vegas was an exception, as its ADRs fell 4.1% yoy, which may be a partial reflection of the higher group booking mix in the market. Overall, the overall pace of annual ADR gains among the top 25 markets has moderated since the first quarter of 2023.
In terms of revenue per available room (RevPAR), 21 of the top 25 markets saw year-over-year gains over the equivalent period. New York City had the highest annual RevPAR dollar gain, increasing $41 (+17.4%) to $274. While Las Vegas ranked second among large markets in terms of occupancy, its year-over-year RevPAR decreased from $140 to $134.
Outside of the top 25 markets, the Alaska market’s four-week average occupancy of 79.9% outperformed all others. This performance was notably higher than last year (+5.7 ppts) and clearly higher than 2019 (+9.9 ppts), a sign that rural demand remains a strong driver in select markets and gives an indication of the growth of cruise travel. Next in line was the Florida Keys luxury hotel market (75.8%, -3.1 ppt yoy), which has remained consistently leisure-driven, both in terms of occupancy and ADR. The Keys market was followed in occupancy by Charleston (75.0%, -2.4 ppts), Salt Lake City (73.3%, -0.7 ppts), Albuquerque (73.2%, -2.0 ppts).
Most of the small to mid-sized markets saw substantial year-over-year gains in their nominal ADRs (not adjusted for inflation). When combined with occupancy performance, 22 markets experienced double-digit RevPAR growth, down from 33 markets in our last monthly update. Overall RevPAR grew in 100 markets beyond the top 25, with growth meeting or exceeding CPI-based inflation in roughly half of those winning markets.
For more information, be sure to check out our Weekly Market Recovery Monitor.
If you are interested in accessing the data behind this visual through our hospitality platform at CoStar, please contact [email protected]
*Analysis by M. Brian Riley.
STR provides premium data benchmarking, analysis and market insights for the global hospitality sectors. Founded in 1985, STR maintains a presence in 15 countries with a 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), a leading provider of online real estate markets, information and analysis in the commercial and residential property markets. For more information, visit str.com and costargroup.com.