Decline in US hotel performance around Independence Day is normal
US hotel performance weakened in the week leading up to the Independence Day holiday, but historically that’s not surprising. At the same time, there is cause for concern and the future is murky at best.
Hotel occupancy in the United States fell 4.9 percentage points from the previous week and stood at 67.3% for the week of June 26 to July 2.
While this may sound alarming, it’s important to note that this type of decline is normal for the 4th of July holiday. Since STR began weekly benchmarking in 2000, the 4th of July or observance of the federal holiday has fallen on a Monday seven times, including last year and in 2016. In each case, occupancy the week before the bank holiday fell more than four percentage points, with most losses beginning on Wednesday and continuing into the weekend. Demand and occupancy are also expected to decline during the week containing the holidays before strengthening in the remaining weeks of July.
While much has been written about inflation and a potential recession, this latest decline is more about normal demand patterns than reaction to the aforementioned macroeconomic conditions. The nominal average daily rate also fell, down 2.5% from the previous week, but was 20% higher than in 2019 and 12% higher than a year ago. Nominal revenue per available room fell 9.2% week over week, but was 23% higher than in 2019 and 16% higher than last year.
There is no doubt that demand and occupancy fell during the week, but context is important given growing economic concerns. Looking strictly at the 27th week of the year since 2000, demand was the highest on record with 26.3 million overnight stays. The previous record was reached in 2016, at 25.7 million. In 2019, when the public holiday was a Thursday, demand was 24.9 million.
Regardless of July 4 falling in two weeks, demand fell when comparing week 27 to week 26. The performance dips seen last week were normal, and the 1.9 million drop in nights from one week to another was not over. from the historical range, which was between a decline of 1.5 million in 2005 and a decline of 4.5 million in 2018. The only time demand did not decline from week 26 to week 27, c t was in 2020, when it increased by 31,000. That was, of course, during the early months of the pandemic, when seasonal trends were thrown out the window.
Finally, the occupancy rate for the week averaged 65% and varied from a maximum of 74% in 2000 to a minimum of 58% in 2009, not to mention the extreme minimum observed in 2020 (46% ). While demand hit a record high for week 27, occupancy for the week was the fifth highest for that period, reduced by increased supply over the many years.
The US hospitality industry continues to perform well and the remaining weeks of summer are expected to continue to be robust with the industry reaching its annual weekly peak by the end of July. Thereafter, demand will begin to weaken as the school resumption begins.
Compared to every week since the start of the pandemic, demand for the week was the ninth highest, with occupancy ranking 11th. After three weeks with the highest market occupancy in the nation, Alaska was passed by Denver at 86%. Alaska was second at 85%, followed by Portland, Oregon at 84% and Oahu at 83%. The lowest occupancy levels were in Tucson at 51% and Tulsa at 52%, but each was above 2019 comparisons. In total, 66% of markets were above their 2019 occupancy levels, but that’s probably because the July 4 holiday fell on Thursday that year, affecting demand all week and making it easier to compare. Overall, only three markets reported their highest level of demand since the pandemic began: Denver, Oahu and Indianapolis. Comparing to the previous 27 weeks alone, 45 markets saw their highest levels of demand, including Orlando, Chicago, Atlanta, Dallas and Houston.
Occupancy in the top 25 markets fell to 70% and 66% elsewhere. In the central business districts, the occupancy rate fell to 70% from 74% the previous week. Nine of 20 central business districts reported occupancy rates above 70%, led by Seattle Central Business District at 80% and San Diego also at 80%.
Airport delays and cancellations likely boosted demand in some markets, including Denver, as the Denver/East Airport submarket posted the highest submarket occupancy rate in the nation. , at 90%. Occupancy in submarkets with the name “airport” ranged from 90% to 52% – Tulsa Airport/North – with most airport locations reporting a week-over-week decline. The largest increase in weekly submarket demand was seen in the New Orleans Central Business District/French Quarter, where occupancy reached 79%. Atlantic City saw the second-largest demand gain of any submarket, with an occupancy rate of over 74%.
Nominal ADR was again strong despite the week-on-week decline. The week’s result was the fifth highest weekly reading since 2000. The four highest readings all came recently in 2022, with three of the four occurring in the previous three weeks. Missouri South, McAllen/Brownsville, Massachusetts Area, Georgia South, Buffalo and Wisconsin South set market records for their nominal ADR. Inflation-adjusted ADR – or actual ADR – also fell week-over-week, but remained above the 2019 comparison for a fourth consecutive week. Of the four, this week’s result was the highest at 5% above the 2019 comparison. Year-to-date, actual ADR has exceeded 2019 comparisons 11 times. ADR record setter in real terms, and only two – Denver and the Massachusetts area – have seen pandemic-era highs.
Nominal weekday ADR (Sunday-Thursday) fell 2.7%, outpacing the weekend’s 1.6% drop. Actual weekday and weekend ADR was higher than 2019. This was only the second time this happened on weekdays, which we attribute to the easy comparison of 2019. Actual weekend ADR has been higher than the comparable weeks of 2019 over the past 20 weeks. Actual ADR across the top 25 markets was also above 2019 for only the third time this year.
With weekly occupancy and a decline in nominal ADR, nominal RevPAR fell sharply, -9.8%, from the previous week, but was still the ninth highest on record for STR since 2000. index through 2019 also reached the second highest level. since the start of the pandemic at 123. Actual RevPAR fell but remained above $90 for a fourth consecutive week and was 8% higher than the corresponding week in 2019. This was only the second time actual RevPAR exceeded 2019, with both occurrences positively impacted by a holiday lag.
Over the past 28 days, 57% of the 166 STR-defined U.S. markets reported actual RevPAR higher than it was in 2019. An additional 42% were in “recovery” — RevPAR pegged to 2019 between 80 and 100. Only two markets—Portland, Oregon, and Southern New Mexico—remained in “recession,” with 2019 pegged RevPAR between 50 and 80.
Isaac Collazo is vice president of analytics at STR.
This article represents an interpretation of data collected by CoStar’s hotel analytics company, STR. Feel free to contact an editor with any questions or concerns. For more analysis of STR data, visit the data analysis blog at STR.com.
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