U.S. occupancy falls during third quarter, but what does it mean?

In absolute terms, STR data shows that New York City is a winner in occupancy, ADR and RevPAR. (Photo credit: Pixabay/mpewny)

As analysts continue to release third-quarter data, trends are showing that occupancy for hotel in the United States is falling. The question is: Should hoteliers be worried?

It might not be the time for concern, according to CBRE. Its data, as well as STR figures, show third-quarter occupancy fell 0.4 percent to 71 percent. CBRE noted that drop is the largest since the first quarter of 2016 and the second largest since the last recession. However, it can be explained by high demand last year because of hurricanes in Texas and Florida.

Ten-X Commercial’s Quarterly Hotel Monitor, which also uses some of STR’s data, shows that U.S. occupancy clocked in at 65.5 percent during the third quarter when seasonally adjusted, and occupancy is 120 basis points off its peak for the cycle. The firm also noted that occupancy peaked at 72.5 percent in 2015 and will drop to 67 percent amid a stress test in 2019 through 2020. It will then return to 71 percent by 2022.

Virtual Event

HOTEL OPTIMIZATION PART 2 | SEPTEMBER 10 & 24, 2020

Survival in these times is highly dependent on a hotel's ability to quickly adapt and pivot their business to meet the current needs of travelers and the surrounding community. Join us for Optimization Part 2 – a FREE virtual event – as we bring together top players in the industry to discuss alternative uses when occupancy is down, ways to boost F&B revenue, how to help your staff adjust to new challenges and more, in a series of panels focused on how you can regain profitability during this crisis.


Related Story: This is what a downturn could look like next year

Declining occupancy affected room rates and revenue per available room, according to the data. Ten-X reported that room rates fell 0.2 percent during the third quarter when seasonally adjusted. That said, room rates are now 2.1 percent higher than a year ago, which the firm noted is one of the slowest readings seen this cycle.

CBRE reported that the average-daily-rate gain is still well above the 1.5-percent growth rate that the third quarter of 2017 saw, but it certainly is lagging the escalation seen over the past three quarters.

Meanwhile, RevPAR grew 1.7 percent to $93.65 during the third quarter, according to STR. That slower growth was again attributed to hurricanes experienced last year that skewed the data.

“Because of the comparison with the post-hurricane demand period of 2017, September broke the industry’s 102-month stretch of consecutive RevPAR increases and ultimately pulled down growth for the quarter as a whole,” said Bobby Bowers, STR’s senior vice president of operations.

He added that the RevPAR growth was the lowest for a third quarter since the current growth cycle started in 2010.

“Regardless, growth is growth, and overall industry performance remains in good shape with our forecast calling for growth through at least 2019,” Bowers said.

The Market Look

The third quarter harbored some winners and losers in terms of performance. According to data tracked by CBRE for 60 U.S. markets, 34 saw occupancy fall. That means 15 more markets suffered an occupancy dip than did in the second quarter.

The Ten-X report shows that occupancy in the top 25 U.S. markets reached 75.8 percent during the quarter. This figure was down 70 basis points from a year ago. The rest of the U.S. markets saw occupancy remain flat from last year at 68.8 percent, which highlights the supply growth seen in large markets. Houston, Dallas and Orlando experienced the largest occupancy declines, due in a big part to normalization after natural disaster events. Detroit, Philadelphia and Phoenix saw the largest occupancy growth.

Related Story: 3 things to know about U.S. hotel transactions in Q3

Overall, STR reported that 18 of the top 25 markets grew RevPAR. Phoenix saw the largest jump in the metric, growing 9.3 percent to $57.55. Philadelphia followed with an 8.2-percent gain to $98.57. Houston experienced the quarter’s biggest declines in each of the three key performance metrics: occupancy (-11.2 percent to 59.8 percent), ADR (-2.1 percent to $100.30) and RevPAR (-13.1 percent to $59.94).

However, when looking at absolute values, New York City appeared to be a winner. STR’s data showed the market ranking first in all three key performance indicators: occupancy (89.8 percent), ADR ($261.92) and RevPAR ($235.21).

Suggested Articles

Maestro now can be deployed in any combination of Windows, a browser or on a tablet while providing a centralized view of the guest.

The companies will be managing properties in Maryland and North Carolina, respectively.

Caesars Palace and the Four Seasons Hotel in New Orleans will get new restaurants from celebrity chefs early next year.