Outdoor destinations, particularly beaches, were among the first to see a rebound in travel beginning in spring 2021. Now that demand appears to be receding more than expected.
Comparing revenue per available room, or RevPAR — an industry standard metric of hotel performance, for the top 40 U.S. lodging markets showed that the six markets with the largest increases from 2019 to 2021 were all Southeast beach destinations, including four in Florida.
Last year’s tremendous growth was measured against the pandemic depths of 2020, so it was expected that growth rates would slow this year. However, last year’s top performers have seen demand growth not just slow, but turn negative, as rooms sold fell below prior-year levels as the summer began.
It is beginning to appear that summer 2021 was a temporary response to the factors impacting travel at that time rather than a long-lasting shift in travel patterns.
The demand declines are even more pronounced in beach-oriented areas within those markets, and that rate of decline has accelerated. Demand in the Norfolk-Virginia Beach area showed small gains while local demand in Virginia Beach was negative 1.7% in May and negative 2.6% in June. Likewise, demand in Miami Beach was negative 2.2% in May and negative 8.2% in June. Tampa’s Clearwater and St. Petersburg areas experienced declines in April, May and June, with the rate of decline growing each month. June demand was down 9.4% in Clearwater and down 11.4% in St Petersburg.
As a result of weaker demand, growth in Average Daily Rate, or ADR — measuring the average rental revenue earned for an occupied room per day, is slowing and has even turned negative in a few areas including Myrtle Beach, South Carolina, and in Florida's Miami Beach and Pompano Beach near Fort Lauderdale.
The impact of lower demand on occupancy rates plus slower ADR growth caused June RevPAR to fall below prior-year levels in several beach destinations. These markets continue to show strong performance relative to 2019, but that is based on last year’s recovery and masks the recent slowdown.
Last summer, many indoor activities such as museums, concerts and plays were either closed or operating under COVID-related restrictions. On the other hand, outdoor attractions were generally open, removing an element of uncertainty from travelers’ itineraries. Plus, outdoor attractions were perceived by many as safer and provided the opportunity for social distancing. International travel and cruises were still severely limited last year, thus many domestic travelers chose to replace a trip to the Caribbean or Mexico with a domestic beach getaway. Meanwhile, multiple rounds of fiscal stimulus injected thousands of dollars into travelers’ bank accounts.
Put it all together, and it was an ideal scenario for beach destinations to thrive in 2021.
Those factors that contributed to last summer’s strong performance in beach markets have begun to fade and results from the spring and early summer suggest that travel is slowly reverting to normal patterns in 2022. Travel to urban destinations is growing and outbound international travel is resuming quicker than inbound, cutting into demand for beaches across the Southeast.