STR Weekly Insights: 12-18 May 2024

Analysis by Isaac Collazo, Chris Klauda

Countries/markets mentioned:

• United States: Louisville, Charlotte
• Global: China, Germany, Indonesia, Ireland, United Kingdom

Highlights
 

• Upper Upscale hotels drove U.S. RevPAR.
• Occupancy declines in economy hotels improving from earlier in the year.
• Strong group demand across the Top 25 Markets and the rest of the country.
• Globally performance comparisons remain positive.

U.S. RevPAR showed modest year-over-year improvement

U.S. revenue per available room (RevPAR) grew 2.8% year over year (YoY) for the week ending 18 May 2024. Once again group and midweek demand across the upper chain scales drove performance. The increase in RevPAR was driven almost entirely by average daily rate (ADR), which rose 2.6%. Occupancy was up 0.1 percentage points (ppts) at 67.4%, which was the highest weekly occupancy of 2024 but still 3.0 ppts below the 2019 comparable.

Across all markets in the U.S., Louisville took top honors with a YoY RevPAR increase of 80.7%, supercharged by the 2024 PGA Championship. Along with the Kentucky Derby earlier in the month, weekends were busy for Louisville hoteliers. Next year, the PGA Championship moves to Charlotte. North Carolina also hosts the next golf major, the U.S. Open, at Pinehurst in June.

Using a revenue-weighted calculation, we estimate roughly half of the most recent week’s RevPAR growth came from Upper Upscale hotels, where RevPAR increased 6% YoY. Other contributors included Luxury (+4.5%), Upscale (+3.6%) and Upper Midscale (+1.6%). ADR drove the growth in these chains, except in Luxury, which saw ADR retreat for the 16th time in the 20 weeks this year and 43rd time in the past 52 weeks overall. New openings, affiliation changes, mix changes, increased outbound travel, etc. are driving down ADR.

In the lower tiers, RevPAR was up slightly in Midscale (+0.8%) and down 2.8% in Economy on nearly equal decreases in occupancy and ADR. Over the past two weeks, occupancy in Economy chains has fallen an average of 0.5ppts versus 1.5ppts seen in all other weeks of the year. While it’s too early to claim that the worse is behind us, the easing declines are positive news.

For those highlighting a May month-to-date RevPAR change of +8.7%, don’t expect that growth to last. In the first 18 days of this month, an extra Friday and Saturday are included whereas a year ago the same 18 days had an extra Monday and Tuesday. Looking at the month on a day-matched basis (Wednesday, 1 May 1 2024 compared to Wednesday, 3 May 2023 and so on), MTD RevPAR is up 4%, driven by the results for the week ending 11 May 2024 when RevPAR increased 6.8%. We expect RevPAR growth to fall more by the time the month ends, but the overall comparison for the month should remain positive and potentially be the best of the year so far. Full month results will benefit from the inclusion of an extra Friday.

Weekday performance boosted the week across Top 25 Markets and the rest of the country

Weekday performance was strong across the nation, increasing 5.2% in the Top 25 Markets and 3.5% elsewhere. Weekends produced RevPAR improvement across the Top 25 Markets (+3.5% YoY) while it was flat in the remainder of the country. The shoulder days (Sunday & Thursday) increased for both areas at about half the rate as the weekday period. And, for the first time this year, RevPAR was flat to up in all day categories among both the Top 25 and all other markets.

Weekday RevPAR advanced by 8.1% in Upper Upscale chains followed by gain of 5.5% in Upscale and 4.2% in Luxury. Luxury and Upper Upscale chains also saw solid weekend RevPAR growth at 5.6% and 4% respectively. Upper Upscale also saw good weekday and weekend ADR gains, topping 3%.

Group demand continues strong with markets outside the Top 25 taking the lead

After increasing by more than 10% in the previous week, group demand continued to advance at a healthy pace, up 8.5% among Luxury and Upper Upscale hotels. Not surprising, weekdays showed the largest increase (+10.3%) followed by shoulder days (+9.7%) and the weekend (+4.6%). Markets outside the Top 25 Markets saw the largest weekday group gain, up 11.1% compared to 5.4% in the Top 25 Markets. However, the Top 25 Markets saw group growth across all day categories, while weekend group was down elsewhere over the weekend. Group ADR was also strong across the rest of the country. up 7.4% compared to 4.7% for the Top 25 Markets. Transient ADR was basically flat (+0.8%) with the Top 25 Markets increasing 1.3% and transient ADR for the rest of the country unchanged.

Global occupancy moves ahead

After falling in the previous week, global occupancy (excluding the U.S.) rebounded, increasing 1.2ppts to 70.5%. Growth was mostly from outside the 10 highest supply countries, where occupancy increased 1.8ppts versus 0.9ppts in the top 10. Germany and Indonesia saw the largest gain in occupancy, rising by 8.6ppts and 6.5pts, respectively. Occupancy was lower YoY in China, but the country’s absolute level rebounded to 71.7% from 59.4% in the previous week.

Germany and Indonesia also led the top 10 in RevPAR growth with RevPAR increasing by more than 28% in both countries on double-digit ADR growth. Overall, global RevPAR was up 7.8% via a 5.9% ADR increase.

The world’s highest occupancy was in Ireland at 89.3%. This was the first time this year that the country took the top spot. Recall, Ireland was in that position numerous times last year. The country has either had the second or third highest occupancy in the world over the past five weeks, which likely signals the start of vacation season.

In the top 10 countries, the U.K. posted the highest occupancy (82.4%). Since the beginning of the year, the country has ranked first, second or third in occupancy in every week, except the first.

Looking Ahead

There are different schools of thought on what the summer will bring in the U.S. given current economic pressures.  Could the lessening of occupancy decreases in the Economy chain scale signal better times ahead for all? Only time will tell. The outlook, based on economic factors, suggests the next eight months will be better than the previous four. However, significant headwinds remain, especially for lower to middle income travelers, due to the higher cost of living. Overall, the media and plenty of qualitative research points to another strong summer.