Excerpt from CoStar
Miami Leads the Way Among Top 25 Markets, While San Francisco Lags
Hotels in leisure-driven cities such as Miami have outperformed while those in business destinations still lag.
Hotels in the top 25 markets across the U.S. were the hardest hit by the pandemic-induced demand downturn but have come back with a vengeance, fueled by outsize rate growth.
Speaking at the 2022 Hotel Data Conference, STR regional sales manager Elyse Kirby said that revenue per available room growth is quickly rebounding in the top 25 markets, particularly those that play host to both business and leisure demand. STR is CoStar's hospitality analytics firm.
"Since February, it's been a pretty upward trend," she said. Average daily rate "has been increasing thanks to our friend inflation, and that's causing the gap between occupancy and ADR to widen."
She noted over the past two years, hotel performance has been improving at a significantly faster pace in leisure-driven markets outside of the top 25, but performance in the larger cities is starting to look more typical.
"They're starting, as group [demand for hotels] returns, to perform a little bit more normal, and that [revenue per available room] gaps seems to be closing a bit," Kirby said.
Among the top 25, Miami has been the darling of the recovery, leading the way in rate growth and surpassing 2019 levels going back to April 2021. Other outperforming markets include Norfolk/Virginia Beach, Orlando, Phoenix and Nashville, although some of those markets have suffered due to extremely hot summer weather.
"Phoenix had been doing really well, but right now it's hot there, and Houston has been seeing a little bit less [demand] in the summer months," she said.
While several key, large markets have been much slower to rebound — including Boston, Chicago, New York and Washington, D.C. — the clear laggard has been San Francisco, which is the only market among the top 25 where rates are not back to 2019 levels as of June. The slow return for the city can largely be pinned to the slow return of business and international travel while the market was still digesting new hotel supply.
But better days are likely ahead even for the most challenged of major cities.
"The return of group and international travel will be a massive, massive opportunity for every single market," she said.
San Francisco is among 10 hotel markets where RevPAR is projected to grow more than 50% for full-year 2022, and among five cities expected to surpass 10% growth in 2023.
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