After a strong winter season and with two months to go, summer bookings and occupancy at Western Mountain resorts for summer 2023 will likely finish down slightly from last year but come close to meeting the record revenue generated last summer, according to DestiMetrics monthly Market Briefing*.

August results were down but not out
In a year-over-year comparison to last August, Destimmetrics reported occupancy was down 2.2 percent for the month while the Average Daily Rate (ADR) slipped 0.4 percent, and the decline in both categories led to a moderate 2.6 percent decrease in revenue for the month. Compared to August 2019, occupancy rates in 2023 were down 12.1 percent, but with daily rates up 38.8 percent, lodging properties captured an aggregated 22 percent increase in revenue for the month compared to 2019.

Strong summer rates help offset occupancy declines
As of August 31, 2023, the combination of actual and on-the-books occupancy from May through October is down 1.9 percent compared to the same period last summer and a slight improvement from one month ago when it was down 2.2 percent. Although there are declines in all six months, September and October indicate the most notable drops. Once again, ADR is easing but not erasing the revenue loss. Daily rates up 1.6 percent for the season, with the largest increases in May and June, resulted in a 0.4 percent decline in aggregated summer revenues.

Looking back to summer 2019 shows a markedly different scenario. Occupancy is down 7.7 percent for the full summer, with all months but October declining. But with the ADR up 41.9 percent from four years ago, the impact of lower occupancy was offset with properties posting a 30.9 percent gain in summer revenues as of August 31, 2023.

“The peak summer months are now firmly in the books, but the autumn months of September and October continue to show the most consistent growth in the past 12 years,” said Tom Foley, senior vice president of Business Intelligence for Inntopia. “At the moment, we’re seeing that trend continue as August bookings for September arrivals are looking strong, and with the right balance of rate management and consumer demand, occupancy and revenues could get even closer to last summer’s record levels.”

The economy and consumer response
For the third time in 2023, the Dow Jones Industrial Average (DJIA) declined from the previous month, down 2.36 percent, or 837.62 points during August. Markets varied considerably during the month, with half of the trading days posting gains and half posting losses. Investors did react positively to bank earnings that suggested the Federal Reserve Bank may pause on interest rate hikes. Employment and wages also appeared to buoy investors, but concerns about a weakening Chinese economy, a significant drop in consumer confidence and a slight uptick in inflation during August combined to dampen investor enthusiasm. Despite the waffling, the DJIA was up 9.2 percent from August 2022.

After two months of growing consumer optimism, the Consumer Confidence Index (CCI) and the Consumer Sentiment Index (CSI) reversed direction during August and retreated, with the CCI dropping 6.9 percent while the CSI was more resilient, dropping just 2.9 percent. After several months of positive perceptions, a resumption of worries about inflation, mainly groceries and gas prices, which remained high, triggered a downturn in optimism.

Also changing direction in August, the national unemployment rate rose 0.3 percent in August from 3.5 to 3.8 percent, with 187,000 new jobs added during the month. New job numbers for June and July were revised down, leading to a three-month average of 150,00 new jobs per month, much lower than the average of 200,000 per month of the last two years and closer to the pre-pandemic average of 169,000. The report also indicates that wages were up an annualized 4.3 percent, which was lower than expected but outpaced inflation. And after lagging behind other sectors in recent months, the hospitality industry had a good month by adding 40,000 new jobs.

Winter season comes into focus
Labor Day weekend and kids going back to school shifted consumer vacation planning to the winter season. As of August 31, on-the-books occupancy for November through February is down 1.2 percent compared to 2022 for the same period, with higher occupancy for November and December while January and February show minor declines of less than three percent in both months. ADR continues its upward trajectory with an aggregated 4.5 percent increase over last year, with growth in all months and January showing the greatest strength, up 8.5 percent over 2022.

Compared to four years ago, occupancy is up 0.2 percent, with increases in November and December. ADR for those four winter months is up 42.9 percent, with gains in all months. Coupled with the higher occupancy, revenues for the period are up 43.4 percent over four years ago for the same period.

Still watching

  • Average Daily Rate: after two months of year-over-year rate increase, summer ADR softened slightly from July, indicating continued rate sensitivity for summer lodging, particularly since there was a pullback early in the summer but mostly recovered during June.
  • Booking Pace: compared to last year, bookings in August made for arrivals in the next six months declined 5.1 percent during August, only the second month that bookings declined in 2023 and marks the sharpest downturn in pace since September 2022. However, much of the decline is attributed to strength in 2022 rather than weakness in 2023.
  • Performance by price tercile: lower-priced properties struggled with ADR during August more than higher-priced terciles. Properties with an ADR below $250 posted a 0.5 percent year-over-year dip in rate for arrivals from August through October. Units in the mid-price range from $251 to $400 also posted a 0.3 percent softening but picked up a small amount of occupancy. The highest tercile, lodging $400 per night and higher, experienced the biggest drop in year-over-year ADR since July but improved occupancy, allowing them to improve monthly revenues. Higher-end properties were better able to adjust daily rates and, as a result, preserved revenue.

“What started as a summer with extreme revenue and lodging demand challenges has achieved a remarkable comeback and is now trending to finish in a slightly down position from a year ago, a vast improvement from how things were shaping up back in February,” said Foley. “Looking ahead to winter bookings, we’re still seeing some rate sensitivity but some return to the rate strength we saw last year at this time,” he continued. “And even though winter occupancy is down slightly, a foundation of high-end bookings is already being established. As economic pressures ease a bit, the stage is set for a winter season that will, as always, be defined by snowfall,” he concluded.

*DestiMetrics, part of the Business Intelligence platform for Stowe-based Inntopia, tracks lodging performance in resort destinations. Approximately 28,000 lodging units in 17 mountain destination communities across Colorado, Utah, California, Nevada, Wyoming, Montana, and Idaho contribute to the data pool and represent an aggregated 55 percent of all available rental units in those regions.

Photo courtesy Heavenly Mountain Resort, California