US September RevPAR change slows post-summer momentum
US September RevPAR change slows post-summer momentum
28 OCTOBER 2020 7:47 AM

With summer fully at an end, U.S. hoteliers hoped they could extend the leisure season into the fall. But slowing RevPAR change could indicate recovery momentum is slowing.

NASHVILLE, Tennessee—With the third quarter on the books, the hotel industry is getting ready for a long, cold winter.

Leisure travelers continue to be the segment that basically holds up the industry and we do not expect that to change in the last quarter of 2020.

1. September RevPAR was down 46.1%
This is basically in line with August results and speaks to an almost complete stall and lack of positive momentum for the industry. Without any real group or corporate transient demand, it is not a stretch to imagine that the rest of the year is going to look similar. Leisure travelers could burn off the vacation they did not take this summer, so maybe we will see a few longer weekend trips this fall and winter (see below), but basically this year is “baked.”

Source: © 2020 CoStar Realty Information, Inc.

2. COVID-19 cases rising nationwide
Unless you live under a rock, you are aware that the number of new COVID-19 cases is increasing, in some places rapidly so, and that will have implications for business travel. Higher case counts mean that CEOs will keep their staff out of the high-rise office buildings in downtown areas, which means that sales/training/consulting meetings will still be conducted via Zoom or Webex or Teams, so there will be little to no travel to downtown/urban/Upper Upscale hotels. The results of empty office towers continue to mirror what we have already reported on for over six months.

Source: © 2020 CoStar Realty Information, Inc.

3. How many hotel rooms are still closed?
Just like last month, around 4% of rooms were still temporarily closed, mostly in the higher-rated classes. Occupancy continued to increase and hit 50% in the week ending 10 October, but this is likely not going to last, and we expect results in the sub-50% range for the remainder of the year.

Source: © 2020 CoStar Realty Information, Inc.

4. Extending the leisure season beyond summer
We have gotten a few questions about the “endless summer of 2020,” referring to the continuation of leisure demand post-Labor Day into the fall. One thing is clear, Saturday occupancies have recovered faster than Wednesday occupancies, a trend that already started in early June.

Source: © 2020 CoStar Realty Information, Inc.

But the percent change is of course a bit hard to parse because it is influenced by what happened last year. So, let’s set this up a slightly different way and look at the achieved occupancies this year. What we can do is look that the difference between Saturday and Wednesday occupancies, using Wednesday as a proxy for business travel and Saturdays as a proxy for leisure travel. Just looking at the percentage point difference for each week yields this interesting chart. Because of the way this year shaped up I thought it was best to add the 2019 data for comparison:

Source: © 2020 CoStar Realty Information, Inc.

So, yes, Saturday occupancies—after a short decline in March and April when the lockdowns took place—were higher than Wednesday occupancies, but the delta is increasing, and quite quickly so. In 2019, the difference of Saturday over Wednesday was over 10 points exactly once—so it was basically an anomaly. In 2020, it has been over 10 points since July Fourth with one exception (when it was +9.8%). So, Saturdays are running much higher occupancies, and you could use that as an indicator that leisure travelers are taking to the roads much more than before, extending the summer season.

5. Brands build pipeline share
When we look at the brands that developers chose to build, the picture has not changed over the last few years. Over 8 in 10 rooms are affiliated with the “Big 6” parent companies. It is probably fair to assume that in the coming years, as developers feel again an appetite for new construction, that they will continue to flock towards these larger entities. The outcome could be that their share actually further increases (!) as it will be harder and harder for an owner to make a case to a lender to not associate their project with a major loyalty program.

Source: © 2020 CoStar Realty Information, Inc.

For more insights from STR’s September 2020 U.S. data, watch the video below.

Jan Freitag is the SVP of Lodging Insights at STR and National Director for Hospitality Market Analytics at CoStar.

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.

Editor’s note: The video included in this article was filmed by Jan Freitag, STR’s SVP of lodging insights and CoStar’s national director for hospitality market analytics, and edited and produced by CoStar Group. HNN is a division of STR, a CoStar Group company.

Download a PDF of the infographic here.

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