Year-over-year comparisons have largely lapped the impact of a surge in omicron cases last year, and hotel industry performance in the U.S. and in markets around the globe is improving slowly but steadily.
The continued return of hotel demand to the top 25 U.S. markets and strengthening of most global markets, which during the pandemic suffered the most, is an encouraging sign of a return to normalcy. Additionally, leisure travel does not appear to be letting up, and as the industry moves into spring break season, leisure travel should continue to be robust.
CoStar hospitality analytics firm STR predicts occupancy and average daily rate will pick up for the next week as spring break season kicks off in several markets.
Globally, strong growth is expected to continue with increasing demand across most countries, most notably China. Asian countries are currently reaping the benefit of China’s reopening, which should eventually spread to more distant countries. revenue-per-available-room growth outside the U.S. will likely show strong double-digit increases for the foreseeable future.
U.S. hotel occupancy came in at 62.8%, which was down from an elevated 64.2% the week prior, which included the Presidents Day holiday, but higher than all other weeks in 2023 and 3% above the 2022 comparable. Average daily rate was lower week over week as well but up 8.9% year over year to $151. As a result, revenue per available room gained 12.1% year over year to $95.
Hotel performance is resembling a more normal pattern as evidenced by improving occupancy in major markets and growing group demand.
One indication of a return to normal patterns is the strong performance in the top 25 markets, which still have ground to make up from pandemic losses.
The top 25 led the week’s year-over-year growth in occupancy, up 5.3 percentage points to 69.1%, while hotel market occupancy in the rest of the country was basically flat at 59.5%.
ADR and RevPAR also increased year over year in the top 25 markets, up 12.3% and 21.7%, respectively.
Twenty-two of the top 25 markets had weekly occupancy higher than the comparable week of 2022.
Cool-weather top 25 markets — such as Boston, Denver, Detroit, New York City and Washington, D.C., which tend to be more business-oriented in March and less attractive to leisure travelers — were the top performers in terms of year-over-year occupancy increases.
Some of the warmer markets — such as Miami, New Orleans and Orlando — experienced slight year-over-year occupancy declines although their overall occupancy levels remained among the highest in the country due to continued strong leisure demand.
Markets outside of the top 25 recorded an ADR increase of 5.2%, which combined with a slight occupancy decline netted a RevPAR increase of 4.9%. Among these markets, Lexington, Hartford, Michigan South and Bergen/Passaic — also cooler weather markets — recorded the greatest year-over-year increases in RevPAR.
A day-of-week review shows weekday occupancy — Monday to Wednesday nights — driving the growth in the top 25 markets, with occupancy increasing 8.1 percentage points and keeping pace with a similar increase in the previous week. This increase was greater than the 5.3-percentage-point increase overall, pointing to increasing strength for weekdays.
Weekday occupancy increased outside of the top 25 markets at a lower rate of 1.5 percentage points — still an increase when compared to the overall decline in occupancy for the non-top 25 markets.
This improved weekday performance for both top 25 markets and non-top 25 markets is continued evidence of the growth in business travel.
Further supporting the return to normal is the return of group demand. Group demand reached almost 2 million rooms sold, up 10% from the prior week and closing in on the 2.3 million rooms sold at the height of the conference/convention season in fall 2022.
Given that the season is just getting started, this group demand growth bodes well for a strong spring for group business.
The top 25 markets with the greatest year-over-year group demand increases are also cool weather cities, with Denver, Minneapolis, Philadelphia, St. Louis, and Washington, D.C., at the top of the list. The non-top 25 markets with the greatest weekly increase in group room demand were Salt Lake City, Oklahoma City and San Jose/Santa Cruz.
Global hotel occupancy — excluding the U.S. — continued to strengthen against last year’s omicron comps. The most recent week did show a seasonal decrease compared to the prior week, dropping 3.1 percentage points to 63.8%. However, that level was still well above last year’s occupancy. On an annual basis, ADR increased 11.3% year over year to $129 with RevPAR up 40% to $82 for the same period.
Barbados had the highest occupancy of any country and continued to show robust winter seasonal weekly occupancy of 86.8%. The country has exceeded 85% occupancy in 11 of the past 16 weeks.
The United Arab Emirates hotel industry reported 86.2% occupancy, dropping to second from from the previous week’s top spot, but still managed to score its sixth-best weekly occupancy during the COVID-19 era.
Occupancy was also comparatively strong in Puerto Rico and Guam, both at 82%; and Bangladesh at 80.2%. Overall, the Middle East and Caribbean had the highest occupancy of all subcontinents at 77.7% and 75.2%, respectively.
Among the 10 largest countries by hotel supply, the United Kingdom reported the highest weekly occupancy at 72.4%, followed by Spain at 69.9% and Japan at 68.1%. Most large markets experienced some expected seasonal slowing in occupancy. Germany is a notable exception, with occupancy up 2.4 percentage points for the week.
Italy and Japan posted the largest week-over-week declines in occupancy, down 9 percentage points and 6.8 percentage points, respectively. In aggregate, the top 10 countries registered a year-over-year occupancy gain of 13.7 percentage points to 64.7%. Top 10 ADR increased 11.2% year over year to $119, and RevPAR grew 41.5% to $77.
Isaac Collazo is VP Analytics at STR. Chris Klauda is senior director of market insights at STR. M. Brian Riley is senior director of hospitality analytics at CoStar Group.
This article represents an interpretation of data collected by CoStar’s hospitality analytics firm, STR. Please feel free to contact an editor with any questions or concerns. For more analysis of STR data, visit the data insights blog on STR.com.
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