The summer is in full swing for the U.S. hotel industry, and so far the impact of rising inflation on summer travel and hotel demand appears to be limited.
Hotel demand is rising at a faster pace than anticipated, according to the latest weekly data from CoStar hospitality analytics firm STR. This supports a hypothesis that those who travel are less deterred by rising prices.
U.S. hotel occupancy rose to 70.6% for the week ending June 11 — the highest level of the year and the third highest since the start of the pandemic.
The previous two pandemic-era occupancy records were achieved in July 2021. Weekday (Monday to Wednesday) occupancy also reached its highest level since the start of the pandemic at 70.1%, as occupancy on each of the three days also set pandemic-era records.
U.S. hotel industry average daily rate for the week was $155, the second-highest nominal level since STR began tracking weekly data in 2000. ADR was up 23% versus a year ago and 15% when compared with 2019. Nominal revenue per available room reached the highest weekly level ever recorded at $110, topping the previous high achieved in July 2018. Nominal RevPAR was 32% higher than a year ago and 11% better than in 2019.
Weekly room demand also reached a pandemic-era high as 27.6 million rooms were sold — more than in any week since early August 2019.
On a chain-scale basis, ADR was at a record high in the upscale, upper-midscale and midscale segments, with upper-upscale hotel ADR at the second-best level of the pandemic era. Adjusting for inflation, real ADR was the third highest since 2000. This likely means that the growth also has a demand component versus being primarily inflation-based. Taking a deeper look at how industry ADR is being driven, 40% of hotels had a weekly ADR that was 20% or more above 2019 comparables, which is well above the year-to-date inflation rate of 13%. Another 19% of hotels grew ADR between 13% and 20%. There are, however, 15% of hotels with a weekly ADR below what it was in 2019.
While nominal RevPAR was the highest ever recorded, real RevPAR was well below the weekly record set in 2016. Nominal RevPAR reached a new pandemic high among the upper-upscale, upscale and upper-midscale chain scales. Not surprising, 81% of markets had weekly nominal RevPAR at a “peak” level, or higher than 2019 levels. Using real RevPAR, 45% were at “peak.” Over the past 28 days, 45% of markets were also at “peak” on an inflation-adjusted basis. Eight markets remained in “depression,” with RevPAR between 50% and 80% of 2019 levels, including San Francisco and Washington.
Twenty of the 166 STR-defined markets reported their highest weekly demand since March 2020, including Boston, Chicago, Los Angeles, San Francisco and Seattle. Weekly hotel demand reached a pandemic-era high in 10 of the top 25 markets, with four others, including New York City, experiencing their second-highest demand of the era. Alaska had the nation’s highest occupancy this week at 86.5%, with Austin coming in second at 85.9%. Overall, 73 markets reported occupancy above 70%, the most since summer 2021, and 10 markets were at or above 80% occupancy. In the same week of 2021, only 56 markets were above 70% occupancy.
All key performance measures — demand, occupancy, nominal ADR and nominal RevPAR — in the top 25 markets were at pandemic-era highs, with occupancy reaching 74.5% and weekday occupancy edging a bit higher at 74.7%. San Francisco posted the highest weekday occupancy of the top 25 markets at 90.2%, followed by Boston at 87.7%. For the full week, Seattle led the top 25 markets with 85.2% occupancy, and New York City was closely behind with 85.1% occupancy. Within the top 25 markets, 43% of hotels posted occupancy above 80%, the most since the start of the pandemic. The solid performance extended into large hotels — 300 rooms or more — where 45% reported occupancy above 80%.
Occupancy in central business districts also reached a pandemic record at 75.5%, as did nominal ADR at $250 and RevPAR at $189. Nine of the 20 central business districts tracked posted their highest weekly and weekday occupancy of the era. Sixty-three percent of central business district hotels reported occupancy above 70% for the week, and 41% had occupancy above 80%. A year ago, only 6% of central business district hotels had occupancy above 80%.
Occupancy in upper-upscale (74%) and upscale (75.9%) hotels surged to their highest levels since early March 2020. Full-week and weekday occupancy surpassed 80% at nearly half of all upper-upscale, large hotels in the top 25 markets. Occupancy was also strong in luxury (71.6%) and upper-midscale (73.8%) hotels. Hotels in the remaining chain scales reported occupancy at or above 65%.
A portion of the strength in the top 25 markets and among upper-upscale hotels came from group demand, which also reached a pandemic record as more than 2.1 million rooms were sold. Group demand was the highest since late 2019 and above what was sold in the comparable week of 2019. Half of the weekly group demand occurred in the first three days of the week, beginning on Monday, suggesting a business focus.
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.
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