Industry experts’ predictions for occupancy and ADR hold steady, even with declining confidence in demand

Analysis by Brannan Doyle

The Hospitality Industry Sentiment (HIS) survey is STR’s quarterly study capturing the experiences and expectations of travel industry professionals. This survey began in Q4 2022, and with the fifth edition completed in Q1 2024, some trends have solidified while others appear to be reversing course.

Each quarter, we ask our global community of travel industry professionals to rate their overall business confidence over the next three months (short-term), the next year (medium-term) and the next two years (long-term). Compared to the previous iteration of this study in Q4 2023, overall business confidence for the next 12 months has held steady, with 35% of respondents rating their confidence at an “8” or higher on a 10-point scale.

On average, however, business confidence ratings in the short- and long-term continue to trend downward. Long-term ratings remain the most optimistic, with 46% of respondents rating their confidence as “8” or higher in the most recent survey — but long-term confidence has also seen the largest and steadiest decline since this study began.

Using only the average ratings from a 10-point scale can hide certain trends, so it’s worthwhile to look at the results from each end of the rating scale as well. In this case, the trend of optimistic ratings (“8” or higher) closely mirrors the results of the average ratings shown above. Meanwhile the less-optimistic ratings (which we define as “4” or lower on the 10-point scale) have shown a concerning trend of growth, particularly in the short-term ratings, where 20% of respondents have indicated their wavering confidence.

Expectations for different demand segments are also mixed. Predictions for business transient demand and group demand growth have trended steadily downward since this question was added to the survey a year ago. In each of those segments, however, expectations remain relatively optimistic; nearly 60% of respondents expect growth in the business transient sector of travel, with closer to two-thirds indicating optimism for group demand growth.

On the other hand, expectations for leisure transient growth are lower. But in the most recent survey, expectations have bounced back to a (very slight) majority of respondents with a positive outlook for growth:

Finally, respondents’ forecasts for hotel occupancy and average daily rate (ADR) paint a generally optimistic picture. Across the board, there have not been any major shifts in these predictions between the last two iterations of this survey. In a relative sense, the predictions for occupancy in Q2 2024 are the least optimistic, but 46% of respondents expect at least a 1-2% year-over-year growth for the quarter. And when adding in those that expect occupancy to be “about the same,” 75% of respondents expect occupancy to at least match the level recorded in Q2 2023. When looking further ahead to full-year 2024, the expectations improve further with 54% anticipating growth of 1-2% or more compared to 2023.

Expectations are even more optimistic for ADR growth. About 62% of respondents expect rate growth in Q2 2024, and this improves to 70% expecting rate growth for full-year 2024. For each timespan, at least 80% of respondents expect rates to match or exceed those recorded in the comparable 2023 period.

One trend to keep an eye on in the charts above: most respondents do not expect occupancy and ADR declines on a quarterly or annual basis, but there have been some small upticks in those expecting significant decreases. The proportion of respondents expecting quarterly occupancy declines of 5% or greater has risen to 10%, and for full-year 2024 it has risen to 7%. For ADR, there has not been much change to the expectation for a decline in 2024 as a whole, but the total proportion of respondents expecting a quarterly decline (of any amount) has risen to 20% overall.

For now, those percentages are merely marginal — but these results will be worth keeping an eye on in the next edition of this survey, launching soon. If you would like to participate in this study, please click here to register for your invitation to the survey (sent only once per quarter), and we’ll send you an exclusive report of the results for each quarter that you complete the survey.