U.S. hotel performance has rebounded in 2022, propelled by a variety of STR-defined markets, including gains in those largest markets that the recovery bypassed last year. Smaller markets have greatly surpassed their pre-pandemic performance. With the year drawing to a close, STR looks at which markets have made their mark on the industry based on the most recent year-to-date (YTD) hotel performance data through week 44, ending Oct. 29, 2022. Percentage change comparisons were made against matched weeks from both 2021 and 2019 (pre-pandemic).
The overall supply of rooms in the United States has increased 1.9 percent YTD from the same period last year, an increase of 2.9 percent. Several of STR’s Top 25 Markets (the largest hotel markets in the United States based on room count) led in supply changes as temporarily closed hotel rooms came back into service in 2022. Nashville’s room supply grew by 17 percent in 2022 compared to 2019, with its central business district expanding by an astonishing 36 percent from 2019.
Total room demand remains a core indicator when looking at the health of the industry—and 2022 has been the strongest demand year on record. Nationally, demand has grown 12.1 percent YTD coming off the 2021 recovery year and is up 3.8 percent from the comparable time period in 2019. Large annual gains occurred in Top 25 Markets such as New York City (+61 percent) and San Francisco, California (+59.5 percent), which were deep into a hotel recessionary cycle during this time last year. Equally noteworthy are smaller beach, outdoor, and drive-to markets—led by Sarasota, Florida (+17.7 percent from 2019)—which are far surpassing their historic demand.
Total room revenue shows the sharpest gains (+36.1 percent year over year) among key indicators, but a more middle-of-the-road lift of 10.2 percent from 2019. One may ask, when is 3.4 percent annual growth in revenue ever middling? The simple answer is inflation. Total room revenues would need to rise by 14.1 percent, on average, to keep pace with the purchasing power of the 2019 dollar. By that standard, real (inflation-adjusted) industry room revenue is down 3.9 percent from 2019.
Given the large-market conditions of last year, it is no surprise that room revenues have more than doubled year over year in both New York City (+133 percent) and San Francisco (+128 percent), while Boston (+98 percent) has nearly doubled. To put that into perspective, inflation-adjusted revenue to those same markets is down significantly from 2019 levels: Boston, Massachusetts, -12 percent; New York City, -22 percent; and San Francisco, -50 percent. Leisure and beach destinations, on the other hand, continue to outperform their 2019 benchmarks for total revenue. Sarasota, the leading market in this category, increased its revenues by more than two-thirds above 2019 levels. Likewise, the leisure-oriented Florida Keys (+60.1 percent) and Maine Area (+50.7 percent) had banner years.
Average U.S. occupancy through week 44 of this year (58.4 percent) has grown from last year (64.3 percent). YTD through the comparable period in 2019, occupancy was 68 percent.
Large markets that were slow to fill rooms in 2021 have seen a strong bounce-back in 2022, with exceptional increases in occupancy. When looking at the percentage increases from 2021, Oahu, Hawaii, led all markets (+42.9 percent to 76.0 percent), followed by San Francisco (+42.8 percent to 65.4 percent) and Boston (+35.6 percent to 69 percent). The shift in core strength to leisure rural travel is reflected in market comparisons to 2019. Compared to historic 2019 levels, Vermont led all markets when looking at percentage point increases, up seven percentage points, followed by the Kentucky Area (+5.6 percentage points) and Sarasota (+6.8 percentage points). Average Daily Rate
Nationally, ADR grew a robust 21.4 percent, with this KPI growing 13.3 percent from the nominal (non-inflation adjusted) 2019 level. Accounting for three-year, 14.1 percent inflation, however, real ADR remains slightly below 2019. Top 25 Markets led YTD gains, with New Orleans, Louisiana, earning the top spot (+45 percent or a $55 increase to $178). Compared to the same time period in 2019, top medal earners were higher-end, luxury-oriented markets such as the Florida Keys (+58 percent), Maui (+55 percent), and Hawaii/Kauai Islands (+49 percent).
Revenue Per Available Room
RevPAR is a key metric that combines the impacts of occupancy with ADR. Perhaps the most important industry metric, RevPAR grew 33.7 percent YTD and was 7.1 percent higher than comparable 2019 levels.
On this combined indicator, San Francisco has had the best year-over-year RevPAR comeback across all U.S. markets. While this market’s recent RevPAR grew 134 percent from last year, its current YTD RevPAR average of $141 fell almost $100 short of its 2019 RevPAR.
The top RevPAR growth markets from 2019—and STR’s final candidates for the top hospitality markets of the year—are dominated by leisure-oriented destination markets. Despite Hurricane Ian, which suppressed room demand for weeks, two Florida markets have averaged outstanding RevPAR gains above historic 2019 norms: the Florida Keys (+57.3 percent) and Sarasota (+56.8 percent). Rounding out the top three markets is the Maine Area (+51.5 percent), which includes both rural and broad coastal regions of the state that can be accessed only by car.
Cautious optimism for 2023
By and large, Top 25 Market performance gains have been doing much better on an annual basis than their 2019 indexed comps. However, a host of factors have moderated core indicators this year and serve as cautionary notes for the future. For one, COVID hesitancy still dominated the start of the year, and we have not left those woods just yet. Inflation, which peaked at 9.1 percent in July but has remained above 8 percent, has led to expense/cost cutting pressures on travelers and operators alike. STR will continue to monitor other recent industry influences—e.g., labor shortages in the travel sector, a strong dollar, shifts in work-travel patterns—as new industry patterns and market leaders take shape into 2023.