Peak-demand months in U.S. markets correlated to peak-rate months less than half of the time, according to this analysis of STR data.
HENDERSONVILLE, Tennessee—Earlier this year, we reported that aggregated U.S. hotel room demand shows little correlation with national average daily rates. But as this article shows, on an individual market basis, we see significant seasonal shifts in terms of market room demand (and subsequent occupancy) and ADR. Sometimes these shifts from peak month to the lowest are dramatic, and even adjoining market areas can have notable peak/valley seasonal differences between themselves and their immediate neighboring markets.
The number and percentage of STR markets experiencing their top/bottom average room demand months (charted below) demonstrates a generally well-understood pattern of warmer, summer month demand peaks and winter ebbs. Over two-thirds of all markets experience their peak demand in either July or August while demand ebbs in December and January for over four-in-five domestic markets.
To add some additional perspective to the overall counts, the below U.S. map outlines the monthly pattern in peak demand to STR markets. The bulk of the country experienced its highest room demand during the month of July, but there are notable alternative demand patterns seen in the four “corners” of the U.S. market map (Northwest, Northeast, Southeast and Southwest plus Hawaii).
Compared to average room demand, ADR seasonality presents a much more complex pattern. Whereas July-August showed peak demand in roughly two-thirds (111 of 164) of U.S. markets, that same period had peak ADRs in fewer than one-half (79/164) of destinations.
The market picture of monthly high-/low-season ADRs gets more “messy” when mapped. The map, for example, clearly shows that many urban centers experience a very different peak in average pricing compared to their near, often more rural markets. A different mix of group/transient rooms may be one major contributor to disparate peak pricing strategies within the urban/rural divide.
Questions related to market seasonality are about opportunity—opportunities taken and opportunities missed. Successful operators and particularly revenue managers should be keenly focused on maximizing rates when the market opportunity allows, with discounting rates as an equally valuable strategy to get “heads in beds” and/or draw more price-sensitive travelers. These tactical debates appear to be a near constant topic of conversation for operators.
On a larger level, there still appears to be a couple of open issues for better understanding hotel seasonality. For one, there is no established definition of how observers to the industry should define seasonality. Room demand may be the most rooted of potential seasonal indicators, but it does not completely reflect the complex mix of localized factors along with operator responses (i.e., ADR adjustments) to seasonal or monthly demand patterns. Continued discussions on how to define and gauge seasonal benchmarking within our sector would be beneficial.
Notably obvious from the “spottiness” of market ADRs, an additional takeaway is that analysts and observers to the hotel/travel industry should exercise some caution (and perhaps add an additional explanatory asterisk point as needed) when broadly generalizing about major seasonal or monthly trends with overnight stays. National and even regional declarations about high and low months will not be applicable to all markets. Depending on how one defines a high/low season, one location’s peak month could be another near market’s lowest period.
The final article in this three part seasonality series will provide a deeper dive on market-based seasonal performance patterns as well as head-to-head comparison with selected U.S. destinations, and will provide a listing of the most and least seasonal U.S. markets.
M. Brian Riley is a research analyst with Market Insights at STR.
This article represents an interpretation of data collected by STR, parent company of HNN. Please feel free to comment or contact an editor with any questions or concerns.