US occupancy increasing as COVID-19 cases reappear
US occupancy increasing as COVID-19 cases reappear
26 JUNE 2020 7:45 AM

U.S. hotel occupancy continues to slowly increase week to week, but a resurgence in COVID-19 cases could dampen the demand surges seen in beach destinations.

SALISBURY, Connecticut—Week by week, the U.S. hotel industry shows signs of silver linings on the clouds, and during the week of 14-20 June, absolute occupancy continued trending upward as drive-to beach destinations received a demand boost.

During his weekly video on U.S. hotel performance, Jan Freitag, STR’s SVP of lodging insights, said the number of global submarkets with less than 25% hotel occupancy is on the decline. (STR is the parent company of Hotel News Now.)

Source: STR, © 2020 CoStar Realty Information, Inc.

“Clearly, two trends are emerging: The number of submarkets with occupancies of less than 25% is rapidly declining, and we are now seeing actually submarkets with occupancies of over 75%,” he said. “That certainly is the leisure drive-to destination demand that we have commented on before.”

During the week of 14-20 June, absolute U.S. hotel occupancy was 43.9%, which Freitag noted is just behind the occupancy reported in China (46.7%) and well ahead of Europe (22.1%).

“The United States occupancy has continued on a slow-but-steady uptick last week to just under 44%,” he said. “And it's good to see that the European occupancies are also starting to recover—one in five rooms was occupied of the rooms that we count open. The China data took a slight step back to an occupancy of just under 47%, but again this is only one week's worth of data so I’m not sure that there is a trend in here yet.”

Source: STR, © 2020 CoStar Realty Information, Inc.

U.S. hotel revenue per available room declined 60.3% year over year for the week, which was a slight improvement over the prior week (-62.6%) and a big improvement over mid-April (-83.6% during the week of 11 April).

Source: STR, © 2020 CoStar Realty Information, Inc.

“It's worth noting, however, that the number of new COVID cases is increasing week over week,” Freitag said. “That, of course, is worrisome on a couple of levels. Number one, does this imply that when states and beaches are opening that people are not being safe, and that we're seeing an increase in number of people infected because of that? The other question is how do mayors and governors react to when the numbers of COVID cases spike in their specific area, and will they restrict meetings, and will that have an impact on the second half of the year when the meeting season is traditionally in full swing?”

On a positive note, U.S. weekend occupancy for 19-20 June was a healthier 51% as beach markets including Myrtle Beach, South Carolina (86.8%); Florida Panhandle (82.4%); and Daytona Beach, Florida (79.7%) each recorded high weekend occupancy.

The lower hotel class segments also continue to outsell the higher classes, Freitag said.

Source: STR, © 2020 CoStar Realty Information, Inc.

“Not a surprise, the class performance data continues to show the bifurcation between limited- and full-service hotels,” he said. “Economy hotels sold over half their rooms; midscale-class hotels will reach 50% occupancy here soon. It is good to see that upper-upscale hotels are almost breaking the 30% occupancy line, and they're not quite there yet and will likely continue to lag the national results.”

For more insights, watch the video below.

Editor’s note: The video included in this article was filmed by Jan Freitag, SVP of lodging insights at STR, on 24 June and edited and produced by CoStar Group. HNN is a division of STR, a CoStar Group company.

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