STR Weekly Insights: 1 – 7 September 2024

Analysis by Isaac Collazo, Chris Klauda

Countries/markets mentioned: 

• United States: Charlotte, Detroit, Houston, New York City, Philadelphia, Salt Lake City, St. Louis, Tampa  
• Global: China (Beijing), Indonesia, Mexico, Spain

Highlights

• Slow week for U.S. hotels
• Labor Day weekend okay
• Global performance growth slowing
• China’s RevPAR declined across a majority of markets

U.S. RevPAR falters 

In the week ending 7 September 2024, U.S. revenue per available room (RevPAR) decreased 5.2% year over year (YoY), ending a seven-week growth streak. Some have attributed the decrease to an early Labor Day (2 September), but long-term historical trends say otherwise. Of the 14 occurrences of an early Labor Day (between 1-4 September) since 2000, this year’s weekly occupancy decrease was the fifth largest. While occupancy also fell in 2019, when Labor Day was on the same date, this year’s decline was steeper. All segments fell, including the Top 25 Markets, chain scales, and Group/Transient. Every day declined with weekends hit the hardest. This suggests that other factors are at play, including the compounding impact of inflation, high interest rates and changes in travel behavior. 

Occupancy declines responsible for most of the RevPAR decrease

The YoY decrease in weekly RevPAR was influenced by occupancy, which was down 2.5 percentage points (ppts). Average daily rate (ADR) also fell (-1.0%). The Top 25 Markets and all other U.S. markets produced equal RevPAR declines (-5.2% YoY) with the largest decline (-7.8%) on the weekend (Friday-Saturday), also due to falling occupancy (-4.1ppts). Weekdays (Monday-Wednesday) and shoulder days (Sunday & Thursday) also showed decreased RevPAR at -4.0% and -3.2%, respectively, with occupancy pushing the decline.

Labor Day week (week ending 7 September) was weak any way you cut it. Room demand was in the middle of the pack (9th of 25 Labor Days weeks going back to 2000) as 22.9 million rooms were sold versus 23.8 million a year ago and 23.3 million in 2019. Weekly occupancy (57.8%) was down 2.5ppts versus a year ago. Grouping markets by supply, in buckets of 25 (six groups) and 21 (one group), we noted that occupancy was down across the board with the Top 25 losing 2.6ppts of occupancy and the remaining down 2.1 to 3.3ppts. ADR was down the most among the smallest markets (~3%) with the Top 25 Markets down 1.1%.

Labor Day weekend was decent compared to the past

The three-day Labor Day weekend was decent. Of the 25 Labor Day weekends in STR’s daily database, the 2024 rendition ranked fifth in terms of total demand (12 million room nights) and ahead of last year (11.9 million). The most rooms ever sold for the Labor Day weekend occurred in 2021 (12.2 million). Occupancy for the weekend was 70.7% compared to 70.8% a year ago. The highest Labor Day weekend occupancy was seen in 2018 (74.9%). Nominal ADR was the highest ever for the weekend ($169), up 0.8% from a year ago. The growth rate was slightly better than last year (+0.6%) but well below the long-term average (+3.1%). Adjusting for inflation, real ADR was the fourth highest for the holiday weekend but down 1.5% from a year ago. 

All said, holiday weekend RevPAR increased 0.7% after falling 1.4% a year ago. Labor Day itself produced occupancy of 40.6%, down 1ppt from a year ago. This was the third consecutive year where occupancy has fallen for the holiday. This year’s occupancy ranked ninth overall with the measure ranging from 32.9% in 2009 to 44% in 2021.

Summer 2024 produced the third highest room demand

Looking at the unofficial summer period (Friday of the Memorial Day weekend to Sunday of the Labor Day weekend), room demand for 2024 (390 million) was the third highest since daily record-keeping began in 2000—behind 2018 (397 million) and 2019 (401 million). On a per capita basis, using total employment for the calculation, the industry sold 2.5 rooms for every employed person this year versus 2.6 in 2019. The per capita measure has been down for the past five years. 

Occupancy this summer averaged 68.2%, flat to last year and down from 72.3% in 2019. From 2014 to 2019, summer occupancy averaged above 72%. ADR was up 1.2%, slightly lower than a year ago and like what was seen in 2019. Both nominal ADR and RevPAR were at record highs, but when adjusting for inflation, ranked eighth and 11^th, respectively, over the past 25 years.

Chain scale RevPAR decreased across the board due to occupancy

RevPAR declined across all chain scales, ranging from -4% to -5.6%, driven primarily by falling occupancy. Upper Upscale saw the largest occupancy decline of 3.1 ppts, resulting in a 5.5% RevPAR decrease. Upscale followed at -2.8 ppts with RevPAR down 5.6%. Luxury posted the smallest RevPAR decrease (-4%) with the bottom three chains scales seeing RevPAR declines of 5% or worse. ADR declines were smallest in Luxury (-0.2%) and Upper Upscale (-0.5%). The remainder of the chain scales saw decreases of 1% or more with Economy down 2%.

Labor Day softness seen across most markets

Only eight of the Top 25 Markets saw RevPAR increases with Houston (+18.5%), St. Louis (+9.9%), Detroit (+9.2%) and Philadelphia (+8.2%) posting the highest RevPAR gains. Across the next 25 largest markets, Charlotte and Salt Lake City were the top two of eight markets seeing RevPAR gains. 

Group performance stalled 

Group demand in Luxury and Upscale hotels also slowed, down 8.5% following seven weeks of growth. Group ADR increased 2.3% despite the decrease in demand. The markets mentioned above (minus Houston) posted positive group comparisons. New York City (finishing up the U.S. Open) and Tampa also benefitted from improved group demand. Transient demand was also down (-2.7%) across the Top 25 Markets as was transient ADR (-1.5%).

Global performance just barely held on to a 14^th week of RevPAR of gains

Global performance grew YoY for a 14^th consecutive week, the result of rising ADR (+3.5%) balancing an occupancy decline (-1.4ppts). Overall, global RevPAR was up 1.4%. ADR was also responsible for RevPAR gains across three top countries.

Mexico topped the list for the second consecutive week with RevPAR up 6.2% on a 21.1% ADR gain that offset a 4-ppt occupancy loss. Spain and Indonesia followed with RevPAR up 14.2% and 12.7%, respectively. China posted a RevPAR decline of 5.9% following last week’s increase, which was its first since June. Most markets across China posted RevPAR declines, including its 10 largest, except Beijing (+11.8%). Macau was also up and led the country (+19.7%).

Looking ahead

This past week served as the proverbial bridge between summertime leisure and the start of the fall business season in the U.S. The next few weeks will be led by events and conferences along with fall sporting events and festivals. October is expected to slow due to the movement of the Jewish observances, which falls in October this year. As a result, we expect September comparisons to be easier due to that movement. Global performance is expected to slow as summer comes to an end but remain stronger than in the U.S.