Once again, occupancy totals for Summer 2022 continued to drift down from last year’s boom in pent-up demand travel and compared to the pre-pandemic record of 2019. Despite the notable decline in actual occupancy, especially in the peak months of July and August, daily rates remain practically unchanged according to the most recent Monthly Market Briefing released by DestiMetrics,* the Business Intelligence division of Inntopia. In tracking aggregated results for lodging at 17 mountain destinations across seven western states through July 31, the downward trend in occupancy that started last winter has continued while the persistently high rates have allowed lodging properties to maintain strong revenues despite the decline in overnight visitors. In contrast to markedly decreased visits in the peak months of July and August, the remaining two months of summer—September and October—are picking up compared to 2019 as guests adjust their travel plans to the months with more attractive rates.
The month of July cooled off
Actual occupancy for the month of July finished down 11.4 percent in a year-over-year comparison to last July but the Average Daily Rate (ADR) for the month was up 6.3 percent and helped to somewhat offset the lower occupancy as aggregated revenues were down 5.8 percent. The picture is different when compared to the summer of 2020 when the pandemic was still hindering destination travel. Compared to that tough year, occupancy this July was up 29.4 percent, ADR was up 35.8 percent to deliver revenues that were 75.6 percent higher than two years ago. In comparison to three years ago and a then record-breaking summer prior to the pandemic, occupancy for the month was down 5.6 percent, rates were up a dramatic 40.6 percent, and lodging properties banked an impressive 32.7 increase in revenues compared to July 2019.
A view of full summer season at the mid-point
As of July 31, on-the-books occupancy for May through October is down 10.1 percent compared to last year at this time and remains down in all six months with July and August experiencing the biggest declines—11.4 and 16.1 percent respectively which is a slight improvement from one month ago. ADR is up 4.8 percent with increases in all six months but the lower occupancy has resulted in a 5.8 percent decrease in revenues.
The comparison to two summers ago continues to be skewed since many travelers were sitting on the vacation sidelines as pandemic anxiety was still looming large. Occupancy for the full summer is up 79.4 percent, ADR is up 26.6 percent, and properties are realizing a whopping 127.2 percent gain in revenues over the challenging summer of 2020.
A more realistic “apples-to-apples” comparison is available when looking at the pre-pandemic performance in the summer of 2019. Occupancy is down 6.3 percent to that more typical summer while ADR is up a robust 38.1 percent. So, despite the decline in overnight visitors, revenues are up 29.4 percent versus Summer 2019.
“Although decreasing occupancy is usually a concern, there are several reasons that the situation is working well this summer,” observed Tom Foley, senior vice president of Business Intelligence for Inntopia. “Many lodging properties are still struggling with adequate staffing issues so having fewer guests while still maintaining impressive bottom-line revenue makes it possible for lodging properties to do a better job servicing their facilities with fewer employees. And, in this tougher economic environment, the lower rates available in September and October are helping to fill those softer months with autumn visitors which allows visitation to spread out more evenly across the summer months.”
First glimpse of upcoming winter
As of July 31, on-the-books occupancy for the upcoming winter months of November through January is down a moderate 4.9 percent compared to this time last year with declines in the first two months and only January showing an uptick at this time. ADR continues its upward trajectory and is up 8.2 percent compared to last year at this time. When compared to two years ago (the 2020-21 season), occupancy is up 55 percent and ADR up a striking 41.1 percent. And when compared to three years ago and the pre-pandemic booking period for the 2019-20 winter, occupancy is down 2.9 percent with ADR up a strong 35.6 percent.
“Even at this early stage, a significant shift in how school breaks are scheduled this year is having a big impact on December bookings, with a lot of occupancy declines happening from mid-December through New Year’s Day,” offered Foley. “But December’s decreases are January’s gains, and the first few weeks of 2023 are looking very strong right now and likely to stay that way,” he continued.
The Dow Jones Industrial Average (DJIA) reversed direction again in July and erased all of June’s losses with a gain of 6.73 percent to mark the largest increase since March2021. The Index was boosted by the Federal Reserve Bank raising interest rates 0.75 percent in an assertive move to curb rising inflation. Strong corporate earnings also encouraged investors along with strong employment figures despite negative gross domestic product (GDP) for the second quarter.
Once again, the Consumer Confidence Index (CCI) declined, dipping 2.7 points down to 95.7 points and marking the lowest level in confidence since February 2021. Citing inflation, particularly for gasoline and food as their primary concern, consumers’ intentions to purchase homes, automobiles, and other large purchases that frequently require financing, are now on the downturn in the face of rising interest rates. If consumer spending slows as expected in the coming months, weaker confidence may make it difficult for lodging properties and attractions to continue with record-high pricing.
The Unemployment Rate dipped down to 3.5 percent in July as employers once again dramatically exceeded expectations and added 528,000 new jobs in July. This is the strongest single month of job creation since February. With this surge, the economy has now recovered all the jobs lost due to the pandemic. Wages increased 5.2 percent to help workers keep up with high inflation.
The National Inflation Rate eased somewhat in July for the first month-over-month decline since April and is now at 8.5 percent for the year. The decrease was attributed primarily to declining gasoline prices and reductions in airfare tickets but inflation remains a big economic concern for many Americans.
- Current summer occupancy as of July 31 is pacing lower than at any time in the last seven years with occupancy down compared to every year back to 2015. Occupancy is down for all six summer months with a deepening decline for both September and October as the only notable changes in the past 30 days.
- Bookings made in July 2022 for arrival from July through December were down 14.7 percent compared to last July. This is a significant improvement from the end of May when it was down 27.6 percent and the end of June when it had slumped down 40.1 percent. This marks the seventh consecutive month that booking pace has declined year-over-year and this slight improvement will not offset the deep deficit in room nights over the past seven months.
- Even though economic conditions are about as contradictory as possible, consumer confidence is ebbing, and inflation continues to loom large for most household budgets, a dedicated group of travelers remain mostly unaffected by the record-high room rates,” explained Foley. “While summer occupancy is lower than any time since 2014, those extraordinarily high rates are giving travel suppliers struggling with staffing issues a bit of a breather without having much, if any, impact on their bottom line. More affordable fall rates are moving some visitors into those months to help further bolster the shoulder season. However, the future of daily rates in the months ahead is uncertain as economic headwinds continue to blow for many households,” he concluded.