Hotel demand slightly outpaced expectations in the last week of March, but is likely to slow as the height of the spring travel season ebbs and hoteliers prepare for the summer wave.
Weekday travel continued to recover, driving growth in the top 25 U.S. markets, the latest weekly data from CoStar hospitality analytics firm STR shows.
The U.S. hotel industry now enters a period of weekly volatility, that in-between period as spring break travel wraps up and summer travel nears. However, weekday demand, from business and group travelers, is expected to continue to recover in the next few weeks.
Globally, the large markets similarly are likely to show muted performance while more leisure destinations will remain steady.
March concluded with an uptick in weekly U.S. hotel occupancy to 66.2%, the second-highest level of the year and up 2.2 percentage points from a year ago, but 1.3 percentage points below the year-to-date high achieved two weeks ago. Average daily rate was $158 and matched last week’s level; like occupancy, ADR was the second highest of the year so far. More importantly, ADR increased 7.3% year over year ahead of inflation, which was up 6%. Revenue per available room came in at $105, up 10.9% year over year and 14% higher than 2019. Real inflation-adjusted ADR essentially matched the 2019 level whereas real RevPAR was down 4%.
U.S. top 25 market occupancy and ADR generally followed the same pattern as the U.S. overall, with occupancy increasing to 72.8% from 72.3% a week ago. Compared to last year, occupancy was up 4 percentage points year over year — the largest gain of the past three weeks. Occupancy in the top 25 markets has been above 72% for the past four weeks — its longest streak at that level since October. A year ago, and during this same time period, weekday occupancy failed to break 70%.
Weekly ADR in these key markets grew 9% year over year, its second week below double-digit growth as easy omicron comparisons fade away, but the growth rate was still higher than the rate of inflation. With strong increases in both occupancy and ADR, RevPAR jumped 15.4%, a pace that was nearly double the growth of a week ago.
While weekly occupancy and demand increased each day of the week, weekdays — Monday to Wednesday — drove top 25 market growth as business and group travel continued recovering. Those three days accounted for 60% of the year-over-year gain in weekly room demand. Weekday occupancy increased 5.9 percentage points year over year to 71.5% and has been above 71% for the past four weeks, although this week’s result was the lowest of the four.
Among the U.S. top 25 markets, only Atlanta and Miami failed to achieve year-over-year growth in weekday room demand. The largest contributors were Las Vegas and Washington, D.C., which posted weekday occupancy of 83%, its highest since the start of the pandemic. D.C. also had its highest weekly occupancy at 78.8% courtesy of the annual National Cherry Blossom Festival. This year’s weekly occupancy was the 10th highest since 2000. In comparison, the 2019 level for the same week ranked ninth at 79.9%.
Outside of the top 25 markets, occupancy increased 1.1 percentage points to 62.5%, and ADR was $138, up 5.1%. Both are improving at a slower pace, which is expected given their substantial recovery in the prior two years. Weekly RevPAR was up 7% year over year to $86.
After falling for five consecutive weeks, weekend occupancy increased 1 percentage point year over year to 75.6%, its highest level of the year so far. The gain was driven by the top 25 markets, where occupancy grew 2.4 percentage points to 81.1% — the highest level since the fall. Outside the top 25, occupancy was relatively flat, up just 0.2 percentage points year over year.
Six of 167 STR-defined U.S. markets reported occupancy above 80%, with the top three spots occurring in top 25 markets. Another 37 markets overall posted occupancy between 70% and 80%. In total, two-thirds — or 110 markets — reported occupancy at or above 60% for the week, compared to 99 markets the previous week. A year ago, 98 markets reached 60% occupancy for the matched week, while 121 markets had hit or surpassed that weekly benchmark in 2019. Some top occupancy callouts which reflect the impact of conventions, robust spring travel and sports tournaments include:
- Highest in top 25: Las Vegas (86.1%), Tampa (82.1%) and Nashville (82%).
- Highest in non-top 25: Florida Keys (82.8%), Sarasota (81.2%) and Fort Lauderdale (80.8%).
- Top year-over-year gainers: Louisville (up 20 percentage points), Indianapolis (up 13 percentage points) and Washington, D.C. (up 12 percentage points).
Five of the top 25 markets posted double-digit, week-over-week RevPAR percentage increases above the prior week: Houston (+23%), Saint Louis (+19%), Washington, D.C. (+18%), Las Vegas (+13%), and Nashville (+11%). Thirty-seven markets had week-over-week RevPAR increases of 10% or higher compared to a total of 19 markets with a double-digit lift in the prior week. RevPAR callouts include:
- Highest top 25 RevPAR: Oahu ($220), Miami ($218), New York City ($195) and Orlando ($191).
- Highest non-top 25 RevPAR: Maui ($491), Florida Keys ($407) and Hawaii/Kauai Islands ($354).
- Top week-over-week gainers: Indianapolis (+31%), Augusta (+31%) and Tulsa (+29%).
- Top year-over-year gains: Louisville (+92%), Indianapolis (+53%), Washington, D.C. (+44%), and Houston (+42%), which hosted the NCAA Final Four tournament.
It is also encouraging to see strong year-over-year growth in the top 10 countries excluding the U.S.
Global occupancy outside the U.S. declined slightly this week to 64.9%, down 0.9 percentage points from the previous week but 13 percentage points ahead of last year. This week’s occupancy was the 14th highest since the start of the pandemic. Weekly ADR rose 20.5% year over year to $134. With strong results in both occupancy and ADR, RevPAR increased by 50.8% year over year to $87. RevPAR has grown by 50% or more every week this year, except during the week ending March 25. In addition, both ADR and RevPAR attained their highest levels of the past 12 weeks.
Among the top 10 countries based on supply, occupancy was up 17.4 percentage points year over year, led by China — up 31.5 percentage points year over year — and followed by Italy, Germany and Japan, where occupancy gains were in the mid-teens year over year. Indonesia saw a noticeable decrease — down 8.4 percentage points year over year — due to the second week of Ramadan. All 10 countries posted year-over-year ADR growth — led by Japan, where ADR jumped more than 106% year over year, which led to a 158% year-over-year gain in RevPAR. China RevPAR growth was also strong, up 151% year over year. Collectively, weekly RevPAR in the top countries was up 62.7% year over year.
Globally, weekly occupancy was the highest in the Bahamas at 80.5%, followed by Ireland at 79.6% and Jamaica at 79.5%. Fifteen of the 103 countries tracked weekly reported occupancy above 70% this week, which was less than the 27 that did so a week ago.
Chris Klauda is senior director of market insights at STR. M. Brian Riley is senior research analyst at STR, Brannan Doyle is a research analyst at STR and Isaac Collazo is VP of analytics at STR.
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.
Return to the Hotel News Now homepage.