Demand for U.S. hotel rooms in the days following the Labor Day holiday weekend was the highest it has been for that period going back to 2000.
The U.S. hotel industry sold a record number of hotel room nights Wednesday to Saturday in the week ending Sept. 10. That’s just the sign hoteliers were hoping for post-Labor Day, indicating that business and group travelers are ready to step up and fill the void that will be left by summer vacationers this fall.
Leisure travel demand remained high for the three-day Labor Day weekend, which set a record for demand on the Friday and Saturday nights that then dipped on Sunday. Still, the full three-day holiday weekend was the second-best ever for the U.S. hotel industry, with 12.1 million hotel room nights sold — just 27,000 fewer than in 2021 and 79,000 more than in 2018, ranked third.
Including all the remaining weeks of the year, the Saturday of the 2022 Labor Day holiday weekend was the third best Saturday on record so far. This continues to point to the strength of leisure demand despite high inflation, market turmoil and increased economic uncertainty.
Despite the solid Labor Day finish and record-setting demand for this time of year, total weekly room demand fell 1.9% week over week as the industry continued its seasonal slowdown. The week-over-week decline, however, was significantly less than in the years prior to the pandemic.
Weekly occupancy was 61.7%, down from 62.8% in the prior week.
Nominal average daily rate dropped 0.5% week over week to $147, which was 15.2% higher than a year ago. Weekly nominal revenue per available room decreased by 2.3% week over week to $91, its third week below $100 but a 24% improvement over the same week in 2021. Accounting for the calendar shift in the holiday, both real inflation-adjusted ADR and RevPAR were above 2019 levels, by 5% and 6%, respectively.
Business travel also appears to have rebounded somewhat after the holiday. Midweek (Wednesday and Thursday) occupancy in top 25 markets increased to 65% from 61% in the prior week.
Occupancy on those two days ranged from 89% in New York City to 40% in New Orleans. Boston, Denver, Los Angeles, San Diego and San Francisco all reported occupancy above 70%. Midweek occupancy was up in all but nine of the Top 25 markets. For the full week, top 25 market occupancy fell 1.3 percentage points week over week to 64%, which can be attributed to typical weakness on the Monday, when the Labor Day holiday is observed, and Tuesday.
Like in the top 25 markets, midweek hotel occupancy in central business districts grew, reaching 64% after falling to 56% before the Labor Day holiday. Occupancy in the Boston central business district increased to 90%, up 10 percentage points week over week. Occupancy in the New York Financial District also increased sharply, by 17 percentage points week over week, nearing 90%.
The Denver, Nashville, Seattle and San Diego central business districts all reported midweek occupancy above 70%. However, midweek occupancy declined week over week in six of the 20 central business districts, with New Orleans (34%) and Atlanta (45%) at the bottom. For the entire week, central business district occupancy averaged 62%, down 0.7 percentage points week over week.
Driving some of the midweek gain was an increase in group business, for which demand reached a six-week high. Group demand increased significantly week over week in Boston, Los Angeles, New York, Orlando, Phoenix, San Diego and Washington. More importantly, those market had their highest midweek group demand of the past five weeks, which bodes well for the remainder of the conference season.
Adjusting for the holiday shift, lower-tier chain scales reported higher midweek occupancy in 2022 than in 2019, with the upper tier lagging. Upper-upscale hotels had midweek occupancy of 64%, down three percentage points from the comparable week in 2019. The upscale hotel segment, a favorite of business transient travelers, reported midweek occupancy of 66%, down 0.5 percentage points versus 2019.
Weekly nominal ADR in the top 25 markets rose by 2% week over week compared to a 2% decline week over week for all other markets. In the metric, the top 25 markets were led by New York (+19%), Nashville (+10%), Phoenix (+9%) and Washington, D.C. (+8%). However, excluding New York, top 25 nominal ADR would have been down 1.3% week over week.
The gain in midweek nominal ADR was even larger for the top 25 markets, up 9% week over week compared to a 0.4% decline for all other markets. Eight of the top 25 markets reported midweek nominal ADR gains above 10%, led by New York (+34%) and Washington, D.C. (+20%). Even without New York, midweek top 25 market ADR was up 4% week over week. Compared to last year, nominal midweek top 25 market ADR was up 25%. Weekly, inflation-adjusted ADR was up 16% year over year.
Nominal weekly RevPAR was slightly positive for the top 25 markets, up 0.2%, compared to a 4% decline outside of those markets. Like with ADR, it was driven by New York, where nominal weekly RevPAR was up 25% week over week. Nashville’s hotel market also achieved a 13% increase in nominal weekly RevPAR.
Midweek nominal RevPAR for the top 25 markets increased 17% week over week, led again by New York City, up 53% week over week, and 12 other markets that reported midweek RevPAR growth of greater than 10% for the same period. Year-over-year growth was also impressive, up 48% for the entire top 25, with real RevPAR up 37%.
Over the past 28 days and adjusting for inflation, 46% of U.S. markets were at “peak” RevPAR, exceeding 2019 levels, and another 48% were in recovery, with RevPAR between 80% and 100% of 2019.
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.