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Seasonality is such an important part of the lodging industry and so ubiquitous that we tend to treat the phenomena as static and not evolving over time. Seasonality causes the fluctuation in demand for guest rooms and other services such as food and beverage and recreational facilities. The ability of hotels to overcome the problems associated with large swings in seasonal demand has a major bearing on the ultimate efficiency and profitability of hotels.

Seasonality patterns are generally thought of as stable and well established. However, our research has found that seasonality patterns are not stable and that monthly occupancies can trend up or down by several percentage points even over a six to ten year holding period.

While seasonality is widely perceived in a negative light, there are many strategies that are used to address the effects of monthly, weekly, daily or even hourly seasonality. These include pricing strategies, diversifying the service offering, market diversification and seeking assistance from government and industry. Increasing the length of the peak season and modifying the timing to school holidays are other strategies.

Although many strategies and tactics can be transferable from one market to another or one chain-scale to another, more detailed research is necessary to investigate the strategies and tactics that have proved successful in exploiting the opportunities presented by seasonality.

But before we seek only those data relationships that have already been found in the past about seasonality, we need to find new methodologies that allow us to uncover new insights. Let’s examine the U.S. lodging industry’s well documented monthly seasonality. The methodology we use here has been recently applied to about thirty major hotel markets in the U.S.

The following graph plots the entire time series of average occupancy levels for the U.S. lodging industry since January 1987. There is clearly a seasonal pattern which reoccurs on a yearly basis. It doesn’t seem to change all that much.

The Cyclical Nature of the U.S. Lodging Industry Expressed by Average Monthly Room Occupancy 1M 1987 – 12M 2018

Source: STR

Let’s try something a little different. The “Spaghetti” graph below illustrates the average monthly occupancies per year. It’s clear that the months of June, July and August have higher occupancies than the shoulder months of March, April, and May as well as September and October and significantly higher occupancies than the trough months of January and December. It is also obvious that occupancies in any one month change from year to year. Unfortunately, we cannot say if these changes are random or following a trend. Trying to find something here is futile among the thirty-two color-coded lines.

A “Spaghetti” Chart of Average Monthly Occupancies by Year (1987-2018) for the U.S. Lodging Industry

Source: STR

The graphs above compare a month with adjacent months but tell us nothing about how the month compares with the same month in other years and the extent to which occupancies for the same month change over time and if that change is meaningful. We may have an intuitive idea that the change is important, but the graphs so far haven’t really helped us.

What is really needed is a graph that compares all the years of a particular month, e.g., January in 1987, 1988, 1989, etc. The following graph does that and adds a trend line to determine if average occupancy for a month is trending up, down or remains about the same over the thirty-two years since 1987.

The Changing Face of Seasonality of Monthly Occupancy for the U.S. Lodging Industry – July is now the Peak Month.

Source: Hotel Investment Strategies based on an analysis of STR data.

The graph illustrates that occupancy has trended down in the months of January, February, May, July, September, and October, with a significant slide in August. July is now the peak month for the U.S. lodging industry. It supplanted August in 1993 and has given up the title to June on only four occasions; 2001, 2007, 2012 and 2018. The months of March, April, June, and November have all trended upwards with December, the trough month of the year, growing more rapidly than any other month. With average occupancy declines in July and August and growth in average occupancy in December, occupancy is more evenly spread across the months today compared to earlier years. The more even distribution of demand throughout the year has many benefits for the hotel operator and ultimately the investor.

Real ADR has trended up in all months as illustrated in the graph below. Real ADR has grown by an average of $14.19 between 1987 and 2018 for each month. It has ranged from a low of $6.51 in February to a high of $18.32 in October as illustrated by the length of the trend line.

Real ADR has Grown by an Average of $14 Per Month Since 1987

Source: Hotel Investment Strategies based on an analysis of STR data.

The correlation coefficients between occupancy and Nominal ADR are surprising consistent for the months of January through June at about 0.43 on average which is considered a moderately positive correlation. The months of July through October witness a correlation coefficients decline to about 0.23, except for the month of August which has a negative correlation coefficient of -0.110. This reveals that when occupancy has increased in July, nominal rates have declined.

Correlation Between Occupancy and Nominal ADR for 32 Years for Each Month 1987-2018

MonthCorrelation Between Monthly Occupancy & Nominal ADR
January0.386
February0.412
March0.487
April0.418
May0.395
June0.457
July0.221
August-0.110
September0.246
October0.240
November0.421
December0.556

Finally, it should be noted that no two hotel markets or destinations have the same seasonality patterns. They may be similar, but there are usually subtle or not so subtle differences that can have a significant impact on the strategies and tactics employed by hotel managers and their marketing and revenue management personnel to ameliorate the effects of seasonality. The underlying structural shifts in monthly seasonality can benefit hotel operators and investors alike. A comparison between the monthly occupancy for the Island of Oahu and Miami/Hialeah highlights the point.

The Trend of Seasonality for Occupancy in Oahu Island Hotels 1987-2018

Source: Hotel Investment Strategies, LLC based on STR data.

The Trend of Seasonality for Occupancy in Miami/Hialeah Hotels 1987-2018

Source: Hotel Investment Strategies, LLC

Although many strategies and tactics can be transferable from one market to another or one chain-scale to another, more detailed research is necessary to investigate the strategies and tactics that have proved successful in exploiting the opportunities presented by seasonality.