Notable early season snowfall and early resort openings in some western destinations have focused attention on the coming winter season as the summer season wrapped up with mixed results. But while the pace of bookings is better this month than September, overall occupancy continues to struggle to catch up with last year, hindered by significant slowing for the December holidays. And since January, the aggregated length-of-stay for a destination mountain visit which saw notable extensions during the pandemic, has slumped dramatically due primarily to the return of back-to-office protocols, inflation, and market uncertainty. These shifts in winter patterns were described, along with a final report on the summer season, in the monthly Market Briefing by DestiMetrics,* part of the Business Intelligence division of Inntopia. The data, collected through Oct. 31, covers 17 mountain communities across seven states.
Short summer summary
For the month of October, in a year-over-year comparison, occupancy eked out a two percent gain over last year, a 7.8 percent increase compared to October 2020, and up 7.9 percent compared to the pre-pandemic October of 2019. Daily rates followed a different trajectory with the Average Daily Rate (ADR) down a scant 0.2 percent compared to last October while it was up an impressive 17.6 percent compared to October 2020, and up a healthy 7.9 percent compared to October 2019.
The full summer season finished with mixed results. Actual occupancy was down four percent in a year-over-year comparison to last summer in sharp contrast to the 39.8 percent increase over the pandemic summer of 2021. Occupancy this summer compared to the pre-pandemic summer of 2019 was down 4.6 percent. The disparities are interesting when looking at daily rates over the same three years. Compared to last summer, ADR was up a moderate 4.2 percent, compared to the pandemic summer of 2020, rates were up a strong 28.2 percent, and a more “apples-to-apples” comparison with Summer 2019 reveals that the ADR was up a whopping 38.5 percent this summer over three years ago.
“With summer bookings starting to decline back in January, and occupancy declines in every month from May through August compared to last year’s big travel resurgence, the four percent decline wasn’t really unexpected” observed Tom Foley, senior vice president of Business Intelligence for Inntopia. “We also saw daily rates settle down from their meteoric rises last summer so that the modest 4.2 percent gain in daily rates over last year still allowed properties to finish the season with essentially flat revenue– a razor thin 0.02 percent increase, despite the lower occupancy.”
Here comes winter
As the pandemic continues to ebb, booking patterns and conditions are stabilizing but the disruptions of the past few years are still having an impact. The booking pace in October for arrivals in the months of October through March was down 4.1 percent compared to last year at this time with declines in four of the six months with December showing the steepest drop—down 20.7 percent. This continues a lengthy pattern of year-over-year declines as pent-up demand last year drove high volume while challenging economic conditions this year are causing consumers to pull back, but is an improvement from the 5.7 percent decline recorded last month. When compared to October 2020, bookings are up 21. 2 percent when potential guests had considerable uncertainty and anxiety about ski resort operations. More significantly, the booking pace this October was up a healthy 8.1 percent compared to the pre-pandemic October 2019—evidence of the more typical three-year growth rate.
Despite the slight boost to mid- and late winter bookings in January through April, November and December occupancy continues to lag well behind last year at this time. And, for the full winter season, on-the-books occupancy for November through April is down a moderate 4.8 percent. ADR for those months is up 12.3 percent compared to last year with increases in every month except November. Despite the decline in occupancy for the season, rate strength is helping to cushion the lower occupancy and is providing a seven percent increase in aggregated revenues over one year ago.
Not surprisingly, when comparing to two years ago and the full pandemic season of 2020-21, occupancy is up 63.6 percent, ADR is up 40.8 percent, and revenues are up a dramatic 130.3 percent. But when comparing to the abbreviated 2019-20 season that lost approximately four high-volume spring break weeks with the mandated shutdown of resorts in mid-March, aggregated occupancy for the season is up 6.9 percent, ADR is up a remarkable 38.6 percent and that combination is yielding a whopping 48.2 percent increase in aggregated winter revenue compared to just three years ago at this time.
Length of Stay Dropping–Considerably
During much of the pandemic, flexible work-from-home schedules and remote schooling patterns created a shift in travel and lodging patterns. The average length of an overnight visit extended and the day-of-the-week for arrival moved around a bit. But as post-pandemic ‘normalcy’ returns, with more workers back in offices and children back in classrooms, the flexibility offered by pandemic situations has waned. Since January, there has been an aggregated reduction in the number of nights for overnight lodging—from a gain of an additional 1.3 nights per booking in February 2022 to an average gain of just 0.3 nights for bookings made in October. Along with the changing office protocols and classroom policies, inflation and market uncertainty have also played a role.
“While seasonal changes in length of stay are common, what we’re seeing now isn’t seasonal but rather a shift in how consumers are either choosing or forced to behave,” explained Foley. “Unfortunately, shorter stays hit the bottom line and could increase the revenue pressure because of the softer booking pace so far this year. On the positive side, pandemic-prompted shifts toward more mid-week nights have persisted and that has been a long-time goal of destination marketing organizations and travel suppliers,” added Foley.
In a dramatic reversal from last month, the Dow Jones Industrial Average (DJIA) rocketed up 13.9 percent–nearly 4,000 points during October to close at 32,732.95 point. The huge surge completely erased the combined declines of August and September driven by better-than-expected earnings and continued job creation. Inflation anxiety appeared to play a lesser role on financial markets as they anticipated ongoing inflation in their calculations.
In a striking flip from the financial market news, the Consumer Confidence Index (CCI) dropped 4.9 percent after two months of gains in August and September, with the CCI settling 8.2 percent lower than where it was last year at this time. Also contrary to financial markets, concerns about inflation ticked up in October led by uncertainty about food and gas prices. And, consumers’ intentions to travel for vacation went down while their intention to make big ticket purchases such as homes, cars, and major appliances went up—potentially to get ahead of additional interest rate increases.
The national Unemployment Rate ticked back up to 3.7 percent in October even though employers exceeded analysts’ expectations with 261,000 new jobs—well above the projected 200,000. Hourly wages rose 0.4 percent for an annual rate of growth of 4.7 percent. “The job news is a ‘good news/bad news’ situation as the Federal Reserve Bank has been aggressively raising interest rates in their efforts to cool the economy and tame inflation and if that strategy works, the economy would see slowing job growth and lower wages,” explained Foley. “And while both are down slightly, neither is declining as the Federal Reserve would like, and that suggests further interest rate hikes are likely.”
Foley went on to say that “higher interest rates impact big-ticket purchases such as cars and homes but can also contribute to a reduction in travel spending.” But he was quick to point out that while that is an expected trend when discretionary spending gets reduced in household budgets, mountain travel is currently proving to be the exception. “Mountain destinations are actually seeing continued strength, with record rates and a modest uptick in the booking pace over the last 60 days.”
The National Inflation Rate declined in October from 8.3 percent to 7.7 percent—its lowest level since January 2020 and an improvement on Wall Street’s projection of 7.9 percent. However, that good news is somewhat tempered by the fact that there were sharp increases in food, energy, and shelter in October compared to September.
Keeping an eye on
*Room Nights Booked: Hidden in the moderate occupancy declines compared to last winter are steeper decline is actual room nights booked—the result of 3.6 percent fewer available professionally-managed units for rent as homeowners change how they use or rent their properties. The result is that the 4.8 percent winter season decline in occupancy is actually an 8.2 percent decline in room nights booked for the season. As inventory is recovering, it is even further down compared to the 2019-20 season at this time with a 5.6 percent decline in units compared to that year and turning the 6.9 percent gain in occupancy to a nearly flat 0.8 percent gain in room nights booked. “Occupancy is always a fluid number because of inventory changes, but those changes are usually small enough that the metric is reliable,” clarified Foley. “But these shifts in inventory are notable enough that any occupancy metric needs to include a good assessment of available inventory and bookings to get the full picture.”
*Absolute Winter Revenue: Properties participating in the DestiMetrics database are currently reporting $511.2 million in on-the-books winter revenue as of Oct. 31—the second highest level ever reported at this point in the season and eclipsed only by last year at this time when it was at $551 million.
“Uncertainty in economic markets and the amount of available inventory—because of owner usage of unit rather than availability to rental pools–is making it a little trickier to predict where we are heading this winter,” continued Foley. “For lodging properties though, daily rates are still driving impressive revenue results, the booking pace is ticking up for the third consecutive month, and early snowfall has precipitated some early mountain openings and that combination is nudging the upcoming winter season in a positive direction,” he concluded.