Destimetrics - Great Snow & Bookings Don’t Save December
The impressive booking pace during the month of December that significantly boosted December and January arrivals was driven primarily by strong and widespread early season snow. But that hefty surge didn’t allow the month of December to catch up with last year’s record and that brisk booking pace didn’t have as much impact on occupancy figures for the second half of the ski season from February through April. According to the most recent Market Briefing released by DestiMetrics,* part of the Business Intelligence division of Inntopia, December’s results were shaped not only by abundant snowfall but a large shift in school holidays from pre-Christmas through the first week of January, and some positive economic news that bolstered consumer confidence. The monthly report includes lodging data from 17 mountain communities encompassing approximately 28,000 lodging units across seven states through Dec. 31.
No record for December but still strong
In a year-over-year comparison to last December, occupancy was down 5.1 percent but that drop in occupancy was eased for lodging properties with a 2.3 percent increase in the Average Daily Rate (ADR). As a result, revenues for the month were only down three percent. Comparing to December two years ago when mountain resorts were operating in uncharted territory with restrictive policies and vaccines had yet to debut, occupancy was up a very strong 27.7 percent with ADR up a robust 44.1 percent from that deeply discounted month so that revenues were up a whopping 84 percent. A more typical comparison can be made to December 2019 before the pandemic hit with actual occupancy up 4.8 percent compared to three years ago and ADR up a striking 31.7 percent for revenues that soared up 38.1 percent.
Full winter picture coming into focus
Abundant snowfall in many destinations delivered a helpful boost in bookings for many locations but economic uncertainty continues to have an impact on mid- and late season occupancy. As of Dec. 31, on-the-books occupancy for the full winter from November through April is down 3.8 percent compared to last year at this time but marks an improvement from where it was one month ago when it was down 5.6 percent. January remains the only month in the winter season showing a year-over-year increase—a slight 1.3 percent. The other five months have occupancy declines ranging from 4.3 percent in November to a sharper decline in April of 7.6 percent for current on-the-books arrivals. Offsetting those lower visitor numbers is continued strength and growth in ADR—up 8.7 percent compared to last winter with increases in every month except November. The result is an aggregated increase in winter revenues of 4.6 percent.
As expected, a two-year comparison to the first full pandemic winter season of 2020-21 reveals some dramatic contrasts–a 60.6 percent increase in occupancy with the seasonal ADR up 45.9 percent and a stunning, but not surprising, 134.5 percent increase in winter revenue compared to this time two years ago. Compared to the winter season of 2019-20, this winter is currently showing a moderate 4.3 percent gain in occupancy, a robust 39.1 percent increase in ADR and a 45.1 percent increase in winter revenue.
Big snow gallops to December’s rescue
History repeated itself during December when generous snowfall inspired a huge surge in bookings for arrival in the month of December—a remarkable 112 percent more bookings made this year than last year. January also benefitted but at a much more modest level—up 4.7 percent. In contrast, bookings during December for arrivals in every month from February through May were all down with the 15.5 percent decline in February the steepest drop. Despite those declines for the longer-lead months, an overall 6.3 percent gain in booking pace is a positive shift and marks the first year-over-year gain in booking pace since last August.
“Booking pace in December was impressive but still wasn’t quite enough to match last year’s record,” noted Tom Foley, senior vice president of Business Intelligence for Inntopia. “But this was expected since shifts in school breaks made it harder to fill rooms, and record-high rates posed an additional challenge as consumers continue to struggle with the cost of living. As we move through January, actual room nights booked for the remainder of the season are a concern and ongoing economic uncertainty is still clearly playing a role, despite better news about inflation easing and a strong jobs report,” he continued. “Fortunately, something we reported decades ago is still true today: great snowfall consistently offsets economic downturns. Though booking lead-times shorten in these situations, resorts and lodging properties can proceed with confidence that as long as the deep snow continues, the current approach to pricing and occupancy should hold up.”
Econometrics
In a sharp reversal of November’s two-month rise, the Dow Jones Industrial Average (DJIA) dropped abruptly during the month by losing more than 1,440 points or 4.2 percent for the seventh month-over-month decrease in 2022—and finishing 8.8 percent lower than its end-of-year closing in 2021. Holiday shopping was higher than expected but consumers remained concerned about inflation and the prospect of a recession as both large and small companies announced layoffs—in seeming stark contrast to a strong monthly jobs report. The DJIA has been down year-over-year fairly consistently since May 2022. “Analysts are predicting a continued bumpy ride in the months ahead, despite good news about December inflation that might ease concerns for the short-term,” offered Foley.
In contrast, what seems like a tape-delay action, both the Consumer Confidence Index (CCI) and the Consumer Sentiment Index (CSI) rose during December. The CCI gained 6.8 percent to finish at 108.3 points and its highest level since April 2022. Easing inflation and an upbeat perception about jobs and the overall economy were cited as the reason for optimism by consumers. Plans for the purchase of frequently finance-dependent items such as homes and cars declined because of increased interest rates, but that hesitancy to purchase wasn’t across the board as consumers reported that their vacation intentions increased.
The CSI, compiled by the University of Michigan, also rose during December from 56.8 points to 59.7 points in December based on survey respondents indicating that easing inflation concerns and a more positive attitude about the economy enhanced their responses. However, unlike the CCI, the CSSI remains near record-low levels.
The national Unemployment Rate declined slightly in December from 3.7 to 3.5 percent as employers added 223,000 jobs to payrolls—a slight cooling in job creation from November but the resulting 3.5 percent unemployment rate matches the levels of early 2020 and marks its lowest level since 1969. This indicates that the efforts of the Federal Reserve to slow the economy are not reducing the need for employees by various industries and sectors. The 2022 monthly average of 385,000 new jobs per month amounted to more than 4.6 million new jobs. However, the Leisure & Hospitality Industry saw only 67,000 new jobs during December and wallowed well below the average 196,000 new jobs added monthly to the sector in 2021. This is the only sector that remains below pre-pandemic levels—932,000 fewer than February 2020 with the lodging sub-sector seeing the slowest return of workers.
The national Inflation Rate declined from 7.1 percent in November to 6.5 percent in December to reach its lowest level since October 2021. Prices declined 0.1 percent during the month and that modest reduction in the cost of goods contributed to improvements in both the CCI and CSI. The aggregated decline was attributed primarily to lower gasoline and airline prices which are both positive developments for the destination travel industry.
Of note
*Snowfall is currently dramatically exceeding all predictions for a dryer-than-usual La Nina weather pattern and the better than expected snowfall allows lodging properties to justify higher rates. The secondary benefit is that a strong and sustained winter snowfall has a ‘long tail’ and can carry over to next season’s advance sales and bookings.
*Winter occupancy as of Dec. 31 is currently down 3.8 percent compared to last year at this time but that 2.2 percent seasonal recovery from Nov. 30 was due almost entirely to bookings made in December for December arrivals and elevated the month from a 13.8 percent monthly occupancy deficit to a more acceptable 4.3 percent deficit by Dec. 31.
*School Breaks shifted considerably in 2022 from 2021 and are having a continuing impact on early January. Many school holidays didn’t begin until Dec. 22 or 23 and significantly reduced the opportunity for pre-Christmas family vacations. However, those same shortened December school holiday schedules were moved to Jan. 2-6, 2023 in many school districts–allowing for post-New Year’s Day family vacations. There are other significant breaks coming between now and the end of this school year that will definitely be impacting the later part of the season.
*Length-of-Stay which averaged more than three nights during 2021 compared to 2019, continued to shrink during December as workers returned to more traditional office settings at a higher level than anticipated while high nightly rates also changed behavior. Bookings made in December for all arrival dates and days of the week were 0.11 nights less than pre-pandemic but that is a significant improvement over November when bookings were 0.39 nights shorter. “While many workers continue to have more flexible schedules than they did in 2019, daily rates that are 30+ percent higher than three years ago are forcing overnight guests to spend more per night but stay fewer nights,” reported Foley.
*Absolute Winter Revenue at participating properties is currently at its second-highest reported revenue level ever at this point in the winter season—second only to last winter. Although down 6.9 percent from that record-setting season, it improved appreciably from the 8.1 percent deficit that it posted one month ago.
“Now that the critical December holidays have wrapped up with a strong showing, the focus shifts to the next few months,” explains Foley. “Very strong snowfall has played a major role in reversing some challenging booking patterns over the past year and positive economic news is nudging consumers into a more optimistic view about discretionary spending, including travel. And for now, it seems that as lodging properties continue to struggle with staffing shortages that make lower occupancy an operational necessity, visitors are tolerating ever-rising rates,” he continued. “But whether that is a sustainable model for destination mountain communities in the months ahead is unclear—even as we are seeing a more normal or typical winter season unfold,” he concluded.
