Every quarter, hundreds of businesses from the Fortune 500 to Main Street will blame the weather in part for lower sales or earnings. Retail, seasonal manufacturers, agriculture, tourism and more all have to show growth, or Wall Street and investors will sell or downgrade a stock for unmet expectations. Occasionally, businesses will give credit to great weather for strong results, but they'll usually pivot to great management and strategy as the reason for higher gains. The truth is somewhere in the middle, but ask any hotel chain if the weather can hurt its business, and the answer is almost certainly yes.
While many companies in retail, seasonal supply, financial services and agriculture have embraced quantifying weather's influence on their business for years now, some are just beginning to factor it in—the hotel industry is in that early stage.
The first step is to quantify how much the weather is influencing the business or customer. For example, Disney World in Florida and Disneyland in California have very different customers and very different impacts due to weather. Approximately 79 percent of Disney World visitors are out-of-state or international tourists, whereas the estimate of out-of-state visitors to Disneyland is just 20 percent. The weather will have a much bigger impact on a Disneyland visitor, as they can cancel a trip with short notice if the weather is unfavorably hot, cold or wet, whereas Disney World is more of a planned vacation months in advance, thereby less likely to be cancelled due to the weather.
Online hotel reservation platforms like Expedia will frequently buy up hotel rooms in vacation areas at a discount and turn around and sell them for a profit to the end user. This can be a risky strategy, as the weather will bring surprises to the business. This past winter and early spring was a good example, when it was the #1 warmest in over 40 years for the U.S. overall (favorable for occupancy rates) but also the #1 wettest in over 40 years, with rainfall up 28 percent vs. a year ago. Many retailers blamed the weather, and some East Coast hotels commented on the impact of lower occupancy rates well into spring 2024 as a result.
Think about all the downstream impacts of a surprise downturn in bookings, with lower restaurant sales, excess food inventory, lower attendance for planned entertainment, and more. The problem gets compounded when the weather is "out-of-sync" for prolonged periods and across wider geographies, which was the case this past Winter-Spring, when the UK was also the #1 wettest in 40+ years, up 42 percent vs. last year, and Europe was the wettest in six years, +12 percent wetter vs. last year. Recall how bad the rivers were at the Paris Olympics due to excess spring rainfall.
Overall, warm/dry weather year-round is better for the travel and hotel industry overall, but there are nuances. An example would be Fall foliage resorts in the Rockies or New England, where colder/drier weather is better for tourists flocking in to see the Fall color. They expect it to be cold and fall-like, not summer-like, when taking this kind of trip. Many beach destinations in the Middle Atlantic (Ocean City, Md., for example) complained about the spring weather being unfavorable for visitors and occupancy rates being down, but then they surged with the favorable warmer/drier June. With many hotels offering one-to-seven–day cancellation policies, consumers can monitor the weather and adjust their plans accordingly, helping or hurting bookings.
Retailers and seasonal suppliers of merchandise know that when the weather is not in their favor, they have to give the consumer a reason to buy, and that’s a steeper markdown discount. When the weather is great and their customer is already inclined to buy, extra advertising is great, as the consumer is thinking about products they need for the weather they're experiencing, so price is less of a concern.
Ask a hotel chain if it’s analyzed how the weather influences its business, and you're likely to get answers like “I’m not sure” or “we haven’t really looked at the weather's role in helping or hurting occupancy rates.” But simple analysis frequently shows a strong correlation between the weather, overall stock price, and even Google Trend search data.
For example, the Google search terms "hotel reservations" and "cruise reservations" over the past decade show some interesting and starkly different trends that also tie back to equities performance. "Hotel reservations" plummeted during the spring of 2020 with COVID, with a Google Trend index of 60, but then rebounded to a decade high of 99 in 2021. It is now dropping again to 73 in 2024 for the fourth year in a row. What about Disney's stock price? So goes the weather and economy, so goes its stock price. Stock price peaked at $199 in 2021, but it is now at a four-year low at $89, with Florida having the wettest summer in seven years and an uptick in hurricanes the past few years.
But bad news for one industry is good news for another, as the search term "cruise reservations" is soaring, going from a low Google Trend index of 21 in 2013 to an all-time high of 96 in August 2024. Royal Caribbean's stock has followed the Google Trend search, with the stock price going from $72 in 2021 to over $169 today. Hurricanes in the Caribbean have been in a lull since the very active 2017-2019 years that were so devastating. While Disney stock went down, Royal Caribbean stock went up, showing in part how the vacation traveler has evolved since COVID due in part to the weather trends (less favorable in Florida, more favorable in the Caribbean).
Without a proper analysis of weather and its influence on occupancy rates, the wrong assumption could frequently be made about which external factor is having the greatest impact on the business. Gasoline prices were dramatically increasing from a low of $2.26 in 2020 to a high of $4.06 nationally in 2022. That had little impact on U.S. domestic vacation travel, but some blamed that for lower occupancy without understanding weather's role. Better business in any weather starts with first understanding how the weather is impacting your business and your customer, followed by proactive (not reactive) year-ahead strategies to mitigate the risk or to capitalize on favorable weather opportunities.
Bill Kirk is founder and CEO of weathertrends360, the world's only accurate year-ahead weather forecasting model with predictive sales analytics for any business, anytime, anywhere.