As the summer travel season wanes across the U.S., demand for hotel rooms is also decelerating.
With about 40% of U.S. schools, kindergarten to 12th grade, back in session during the week ending Aug. 13, the hotel industry sold 558,000 fewer room nights than the week before. Hotel occupancy for the week was 68.5%.
While hotel demand has declined for three weeks straight, the pace of decline has been slower than expected, and the 2022 summer travel season is still trending as the fourth best of the past 22 years, according to data from STR, CoStar’s hospitality analytics firm.
Hotel demand was down 2% from the previous week. This week in 2011, which has the exact same calendar composition as this year, demand fell by more than 3%.
The highest percentage of states that had started the school year by the week of Aug. 13 is in the south. The migration of people from northern U.S. states to the south since 2011, and especially during the pandemic, suggests that more families are back to school and thus the impact on travel should be greater this year than in 2011.
Under that reasoning, a lower weekly rate of decline in hotel demand is a good sign that travel remains strong despite inflation, travel hassles and the fears of a recession. Overall, the week’s demand was 98% of the level achieved in the comparable week of 2019.
U.S. hotel average daily rate and revenue per available room also softened, and have declined for the past three weeks.
Nominal ADR was down 1.5% week over week to $152, but still 8.5% higher than it was a year ago. Nominal RevPAR fell 3.5% compared to the previous week to $104, but was 13% higher year over year.
Real ADR, adjusted for inflation, was equal to 2019, but real RevPAR was 5% lower.
Nominal ADR has been above 2019 levels for the past 27 weeks, and was 16% higher in the most recent week. Real ADR, however, fell below 2019 in each of the previous two weeks. Prior to the fortnight, real ADR had been above 2019 levels since mid-May.
Real RevPAR has only surpassed 2019 three times this year. The most recent week, however, was an improvement over the previous week, when real RevPAR was down 7% from the 2019 level.
Friday and Saturday nights accounted for 59% of the total decline in weekly demand, with nearly three-quarters of all U.S. hotel markets reporting lower demand on the weekend.
Weekday demand — Monday to Wednesday — was fairly stable, falling by only 34,000 room nights week over week.
Market Performance
Among markets that recorded a decline in weekend hotel demand, the largest drop was in Orlando, accounting for 8% of the demand loss. Baltimore, Chicago, Los Angeles and Minneapolis together accounted for 14% of the total weekend demand loss among the markets losing demand. Forty-one hotel markets gained weekend demand, including Boston, Miami and Pittsburgh.
All of the aggregate decline in weekday demand came from the top 25 markets.
Weekday hotel demand declined in 12 of the top 25 markets, with Orlando posting the largest decrease, down 20,000 room nights. Other markets that reported a loss in weekday demand included Atlanta, Los Angeles, Nashville, San Francisco, San Diego and Tampa. Together, the 12 markets sold 91,000 fewer weekday room nights, offset by a gain of 57,000 room nights in the remainder of the top 25. Weekday demand gainers included Boston, Chicago, Dallas, Houston and Washington, D.C.
Weekday occupancy for the top 25 markets was 69%, which was that group’s second week below 70% since mid-July. Weekday occupancy for central business districts was also below 70% at 67%, but up one percentage point week over week. Group demand, a key demand driver of the top 25 markets and central business districts, declined slightly week over week but was 95% of the 2019 level.
Group demand for hotels is expected to be flat or down until Labor Day, and then rise overall through the end of October, with some up and downs given holidays along with the Jewish religious observances in late September and early October.
While as an aggregate the top 25 markets were responsible for the weekday demand decrease, several markets outside of the top 25 also recorded a decline in demand. Most notably, Greensboro/Winston Salem sold 17,000 fewer room nights Monday to Wednesday; the Florida Panhandle was down 13,000, and Pittsburgh was down 9,000 room nights. These decreases were offset by gains in other markets outside of the top 25.
The highest weekly occupancy was in Portland, Maine, at 93%, followed by Alaska at 90%. The lowest occupancy was in Macon/Warner Robbins, Georgia, at 50%. New Orleans hotels reported the second-lowest weekly occupancy at 53%, and have had occupancy below 60% for the past six weeks.
Occupancy in New York City remained above 70% as it has in 21 of the past 22 weeks, but at 77% was its lowest of the past 11 weeks. Room demand was at 83% of the 2019 comparable with ADR 8% higher than in the comparable week of that year at $191.
Nineteen markets — including Austin, Atlanta, Dallas and Nashville — have achieved record hotel demand this summer. Atlanta has sold 5.8 million summer rooms thus far, versus its previous high of 5.7 million rooms in 2019.
On the flip side, this summer ranks 20th out of 22 for San Francisco. Summer room demand for the city has been 3 million to date, compared to 3.7 million in 2018. Maui and Oahu are also observing summer demand that is near the bottom versus previous years. However, for 63% of markets, this summer is ranked among the top five best.
Overall, real, inflation-adjusted ADR surpassed 2019 levels in 98 of the 166 STR-defined U.S. markets. Maui had the largest increase with real ADR 41% higher than what it was in 2019. Nominal ADR for Maui was $654, which was also the highest ADR of any market this week. San Jose and San Francisco both had a 22% deficit in real ADR compared 2019. All-time highs in real ADR were recorded in two markets during the week: Washington State and Portland, Maine. While Maui had the highest nominal and real ADR of any market this week, its weekly level was its 28th best since 2000.
Nearly half of all markets had real weekly RevPAR above 2019 this week, versus 85% of markets when comparing nominal RevPAR. Smaller markets — Georgia North, Missouri South, Hawaii/Kauai, and South Dakota — had the highest real RevPAR premiums to 2019, all more than 30% higher than in 2019.
Over the past 28 days, real RevPAR was above 2019 in 41% of markets, which STR labels as “peak.” Another 55% were in “recovery,” meaning real RevPAR was between 80% and 100% of 2019 RevPAR. Seven markets, including San Francisco, San Jose and Portland, Oregon, are in “recession” as real RevPAR was between 50% and 80% of 2019’s level.
Isaac Collazo is VP 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.