Though it’s early, we have begun to see signs of progress. In the third quarter, we delivered approximately 46,400 total nights. And from a mix perspective, 57% of total nights delivered were paid nights, our highest level since the second quarter of 2022. 54% of total nights delivered were in our residences, our highest level since the first quarter of 2022. Finally, our resident ADR in the third quarter was approximately $1,600, while residence occupancy was 73% compared to 81% in the third quarter of 2022 and up 1% from the second quarter of this year. We also believed earlier this year that average daily rate was elevated and negatively impacting the value proposition for our members. We thought they show up in our numbers, with a more than 10% decline in the number of paid bookings for residences in Q2 2023 compared to the prior year.
However, in June, we lowered our ADRs and we’ve seen this approach paying off as the number of nights booked in our residences in the third quarter remained consistent with the prior year, despite the decrease in the number of subscribers. As Eric mentioned, our residences have always been the flagship of our portfolio and deliver the highest economics, and we are pleased with the reengagement in paid residences booked bookings by our members in Q3. Again, it’s early time but these data points are encouraging and helped contribute to an annual sequential increase in travel revenue per subscriber. Unfortunately, solid travel performance was not enough to offset year-over-year and quarterly decreases in subscription revenue of 14% and 7%, respectively.
We ended the quarter with 14,500 active subscriptions, comprised of approximately 11,800 Club subscription and 2,700 Pass subscriptions. In each of the past four quarters, we have now seen Pass subscriptions consistently decrease, resulting in a $5 million year-over-year decrease in our subscription revenue attributable to pass. We’re keeping a close eye on this trend and evaluating future actions to take regarding Pass subscription sales. From a Club perspective, we believe the macroeconomic environment and the perceived challenges of the business contributed to fewer-than-anticipated new sales, while these factors plus elevated ADRs in 2022 and the first half of 2023 led to increased resignations. Importantly, an emphasis on multiyear subscriptions has led to approximately 80% of new Club sales in 2023 being for two or more years which has helped drive improved Club retention.
In the third quarter, our cost of revenue was $58 million versus $63 million in the third quarter of 2022. The decrease in cost of revenue was in part due to reduced hotel booking fees between periods, a sign that another key initiative of better leveraging our leased hotel has begun to take hold. Strategically, net rate hotel continued to be a valuable lever at our disposal as we were able to both satisfy member demand and test new markets. Another factor contributing to the decrease in cost of revenue was our portfolio optimization efforts that Eric touched on previously. As a reminder, due to the lag between when we entered to lease terminations and the expiration of those leases, those savings were planned to be modest in the third and fourth quarters of 2023, followed by a more significant reduction in the first quarter of 2024.
Consistent with our communications in the prior quarter, we anticipate at least $25 million of annualized lease expense savings in 2024. From an expense standpoint, the third quarter included several nonrecurring charges, primarily related to severance payments associated with the July reduction in force and changes in executive leadership that occurred in the quarter. This is part of our payroll reduction plan that we also discussed on our earnings call last quarter, targeting approximately $20 million of annual payroll savings. As such, total operating expenses were $43 million in the third quarter or 52% of revenue compared to $41 million or 43% of total revenue in the third quarter of last year. Excluding severance-related expenses and stock-based compensation, our cash operating expenses were just under $33 million compared to $38 million in the third quarter of last year.
From an adjusted EBITDA standpoint, we had a loss of $9 million in the quarter compared to approximately $7 million in the third quarter of 2022. Importantly, adjusted EBITDA loss in the third quarter would have been approximately $4 million, if not for the severance expense I just mentioned as well as a $2 million reduction to revenue due to revenue recognition accounting for our recently launched Inspirato voyage program. This is meaningfully better than our internal projects. In terms of cash and liquidity, in late September, we received a $25 million investment from Capital One Ventures contributing to a cash balance of over $50 million at the end of the third quarter. We anticipate a free cash flow deficit in the fourth quarter before more significant things take hold in 2024.
