U.S. hotel performance softened during the week leading up to the Independence Day holiday, but historically, that’s not surprising. At the same time, there is much to be concerned about, and the future is murky at best.
U.S. hotel occupancy fell 4.9 percentage points from the previous week and came in at 67.3% for the week of June 26 to July 2.
While that might seem alarming, it is important to note this type of decline is normal for the Fourth of July holiday. Since STR began weekly benchmarking in 2000, the Fourth of July or the observance of the federal holiday has fallen on a Monday seven times, including last year and in 2016. In each case, occupancy in the week before the holiday fell by more than four percentage points with most of the losses beginning on Wednesday and continuing into the weekend. Demand and occupancy are also likely to come in lower for the week containing the holiday before strengthening in the remaining weeks of July.
Although much is being written about inflation and a potential recession, this latest decline is more about normal demand patterns versus a reaction to the aforementioned macro conditions. Nominal average daily rate also retreated, down 2.5% from the previous week, however, it was 20% higher than in 2019 and 12% greater than a year ago. Nominal revenue per available room dropped 9.2% week on week but was 23% above 2019 and 16% higher than last year.
There is no doubt that demand and occupancy fell in the week, but context is important given increasing economic concerns. Looking strictly at the 27th week of the year since 2000, demand was the highest ever recorded at 26.3 million room nights. The previous high was achieved in 2016, at 25.7 million. In 2019, when the holiday was on a Thursday, demand was 24.9 million.
Regardless of whether the Fourth of July has fallen into two weeks, demand has drops when comparing week 27 versus week 26. The performance declines observed this past week were normal, and the week-on-week decrease of 1.9 million room nights was not out of the historical range, which has been between down 1.5 million in 2005 and down 4.5 million in 2018. The only time demand hasn’t fallen from week 26 to week 27 was in 2020, when it increased 31,000. That was of course during the early months of the pandemic, when seasonal patterns had been thrown out the window.
Finally, occupancy for the week has averaged 65% and ranged from a high of 74% in 2000 to a low of 58% in 2009 — excluding the extreme low seen in 2020 (46%). While demand reached an all-time high for week 27, the week’s occupancy was the fifth highest for that period, lowered by increased supply over the many years.
The U.S. hotel industry continues to perform well, and the remaining weeks of the summer should continue to be robust with the industry hitting its annual weekly peak by the end of July. Thereafter, demand will begin to soften as the resumption of school begins.
Market Highlights
As compared with all weeks since the start of the pandemic, the week’s demand was the ninth highest with occupancy ranking 11th. After three weeks with the nation’s highest market occupancy, Alaska was surpassed 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 were above 2019 comparisons. A total of 66% of markets were above their 2019 occupancy levels, but that is likely because the Fourth of July holiday fell on Thursday that year, affecting demand that entire week and making for an easy comparison. Overall, only three markets reported their highest demand level since the start of the pandemic: Denver, Oahu and Indianapolis. Comparing only to previous week 27s, 45 markets saw their highest demand levels, including Orlando, Chicago, Atlanta, Dallas and Houston.
Occupancy in the top 25 markets dropped to 70% and dipped to 66% elsewhere. In central business districts, occupancy fell to 70% from 74% in the previous week. Nine of the 20 central business districts reported occupancy above 70%, led by Seattle central business district at 80% and San Diego, also at 80%.
Airport delays and cancellations likely lifted demand in some markets, including Denver, as the Denver Airport/East submarket posted the highest submarket occupancy in the nation at 90%. Occupancy in submarkets with “airport” in the name ranged from that high of 90% to a low of 52% — Tulsa Airport/North — with most airport locations reporting a week-on-week decrease. The largest submarket weekly demand increase was seen in New Orleans central business district/French Quarter, where occupancy reached 79%. Atlantic City saw the second largest demand gain of any submarket with occupancy topping 74%.
Nominal ADR came in strong once again despite the week-on-week decrease. The week’s result was the fifth highest weekly value going back to 2000. The four higher values all came recently in 2022, with three of the four occurring in the preceding 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 real ADR — also decreased week over week but remained above the 2019 comparable for a fourth consecutive week. Of the four, this week’s result was the highest at 5% above the 2019 comparison. Since the start of the year, real ADR has surpassed 2019 comparisons 11 times. No market set an ADR record in real terms, and only two — Denver and Massachusetts Area — saw pandemic-era highs.
Weekday (Sunday-Thursday) nominal ADR fell 2.7%, outpacing the weekend decline of 1.6%. Real weekday and weekend ADR was above 2019. This was only the second time of this occurrence on weekdays, which we attribute to the easy 2019 comparison. Weekend real ADR has been higher than the comparable weeks of 2019 for the past 20 weeks. Real ADR in the top 25 markets was also above 2019 for only the third time this year.
With week-on-week occupancy and nominal ADR falling, nominal RevPAR fell sharply, -9.8%, from the prior week, but it was still the ninth highest ever recorded by STR since 2000. The index to 2019 also reached the second highest level since the start of the pandemic at 123. Real RevPAR dropped but it remained above $90 for a fourth consecutive week and was 8% higher than in the matching week in 2019. This was only the second time that real RevPAR surpassed 2019, with both occurrences positively impacted by a holiday shift.
Looking at the past 28 days, 57% of the 166 STR-defined U.S. markets reported real RevPAR above what it was in 2019. Another 42% were in “recovery” — RevPAR indexed to 2019 between 80 and 100. Just two markets — Portland, Oregon, and New Mexico South — remained in “recession,” with RevPAR indexed to 2019 between 50 and 80.
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.