STR Weekly Insights: 18-24 August 2024

Analysis by Isaac Collazo, Chris Klauda, Will Anns

Countries/markets mentioned: 

• United States: Chicago, Houston, Milwaukee, New Orleans 
• Global: China, Mexico, United Kingdom (London)

Highlights
 

• U.S. RevPAR up for sixth consecutive week
• All chain scales posted RevPAR gains for only third time since May 2023
• Chicago sees DNC lift 
• Group demand healthy and growing in the U.S. Top 25 Markets
• Taylor Swift’s final European shows lift London

U.S. revenue per available room (RevPAR) soared in the week ending 24 August 2024, up 4.5% year over year, which was the highest increase of the past eight weeks. The Top 25 Markets again led the industry, especially on weekdays (Monday-Wednesday) and were supplemented by growth elsewhere, especially Transient weekday demand in non-Top 25 Markets. Room demand has been trending upwards for the past four weeks, still led by the upper-tier chain scales (Luxury & Upper Upscale) but with added contributions from the middle of the market (Upscale and Upper Midscale) and less decrease in the lower tier (Midscale & Economy). Average daily rate (ADR) gains generally met or exceeded the current level of inflation. With conference and convention season around the corner, the next couple months are expected to follow similar patterns. 

Highest RevPAR gain in eight weeks

The U.S. RevPAR increase of 4.5% included contributions from both ADR (+2.7%) and occupancy (+1.1 percentage points). This was the highest RevPAR gain since the week ending 29 June 2024 (+6.9%). More importantly, RevPAR comparisons have been positive for the past six weeks. Both the Top 25 Markets and the remaining markets saw solid growth with weekdays providing the largest RevPAR lift (+6.4%), more a result of ADR (+3.7%) than occupancy (+1.7ppts). RevPAR on shoulder days (Sunday and Thursday) increased 5.1% with ADR up 3% while occupancy rose 1.2ppts. 

The weekend (Friday/Saturday) was slower but with positive comparisons as RevPAR was up 1.5%. That was the first weekend gain in five weeks, mostly due to ADR (+1.2%). Overall, ADR was at or above the rate of inflation for all day categories except weekends. 

All chain scales increased RevPAR for only the third time in the last year-plus

While bifurcation continued, year-over-year RevPAR comparisons were positive for all chain scales for the first time since April and only the third time since May 2023. Luxury hotels produced the greatest RevPAR increase (+8.9%) with a strong occupancy increase (+3.4ppts) and solid ADR growth (+3.3%). The remaining five chain scales improved RevPAR in descending order from Upper Upscale (+5%) to Economy (+2.5%) with ADR increasing at a rate greater than or equal to occupancy. 

Chicago hotels elevated by the Democratic National Convention

Chicago, which hosted the Democratic National Convention, posted RevPAR growth of 51.1%. All Chicago submarkets increased RevPAR ranging from +74.7% in the Chicago CBD to +5.5% in Lake County. Submarkets closer to the event saw the greatest lift, which included Chicago O’Hare Airport (+54.5%), Chicago North (+26.2%) and Chicago Southwest (+22.2%). Last month, the Republican National Convention in Milwaukee produced RevPAR gains for the week of 230.4% in the CBD and 178.0% across the entire market. It is important to note, however, that Chicago comprises six times more hotel rooms than Milwaukee.   

Houston experienced another record week with RevPAR increasing 45.7%. Submarkets outside the CBD were the primary drivers due to a variety of factors including lingering displacement due to Hurricane Beryl, oil & gas turnaround activity, and end of summer leisure travel and events.  

New Orleans, with the 105^th annual American Legion National Convention, saw robust performance with RevPAR up 29.1%. That placed “The Big Easy” in the top five of all markets in RevPAR growth for a seventh time in the past eight weeks.

Healthy Group performance propelled by weekdays

Group demand in Luxury and Upscale hotels was up for the sixth week in a row, increasing 3.7% YoY along with a healthy advancement in ADR (+7.6%). Weekdays have been the primary demand driver for the past four weeks with weekday Group demand up 6.5% for the most recent period. Demand on shoulder days was also strong, up 4.4% while weekends declined 2.0%. ADR increased for both shoulder days (+10.2%) and weekdays (+8.8%) with weekends lower at +3.4%. The Top 25 Markets were entirely responsible for the gain in Group demand, up 9.5% while ADR increased 8.3%. The top two markets, Chicago and New Orleans, recorded double-digit Group occupancy growth. 

Transient performance across Luxury and Upper Upscale hotels was up for the first time in three weeks with demand increasing 2.7% and ADR up 1.6%. Weekdays were the strongest with demand up 3% and ADR up 2.9%. Weekends produced the weakest performance while still positive. Houston and San Diego saw the greatest increase in Transient demand across the Top 25 Markets. Transient demand across the rest of the country increased 4.5%.

Goodbye Taylor Swift, thanks for a good summer.

Global performance improved for the 12^th consecutive week, with RevPAR increasing 5.3%. This uplift was largely driven by ADR, which rose 4.4% while occupancy showed a modest gain (0.6ppts). And even as occupancy grew slightly to a level of 72.6%, it was the 10th highest of the past three years. Recall, three weeks ago, global occupancy, excluding the U.S., reached its highest level since 2019 (74.3%).

Mexico saw a significant RevPAR gain of 7.2%, with the second-highest ADR increase of the top countries at +13%, continuing a double-digit growth trend since late July. However, occupancy has been softening, dipping to 59.4% for the most recent week, down 3.2ppts. Within Mexico, all markets posted ADR gains, notably the Mexican Caribbean at +26.4% and the Pacific South market at +16.1%. Occupancy growth was seen in three of 12 markets, with increases ranging from +0.4ppts in the Pacific Central market to +1.4ppts in Mexico Central/Bajo. 

RevPAR continued to fall in China, down 4.0% as ADR decreased 6.3%. However, occupancy (+1.9 ppts) rose for the first time in nine weeks. RevPAR has fallen for nine consecutive weeks and in 26 of the past 34 weeks.

In London, the last two nights (Monday and Tuesday) of Taylor Swift’s European tour produced a significant performance boost with occupancy up 9.8ppts and ADR rising 15.1%. Across all five tour nights, occupancy grew 8.1ppts and ADR advanced 18.4%. For the entire week, London RevPAR grew 11.9% on a 5.8% rise in ADR and 4.6ppts occupancy increase. Occupancy reached 84.0% for the week, down from the prior week (86.8%) but above 80% in 16 of the past 19 weeks. 

This year has been a Taylor Swift summer in Europe with concerts across 13 countries. An impact analysis of the Eras Tour in Europe will be available on STR’s website in the coming weeks.

Looking ahead

U.S. hotels had a solid week, and August has been stronger than July, but we expect the final week of the month to be flat to down, based on 2019 performance, where the year looked a lot like this year. 

However, early projections show that the month will post solid RevPAR growth due in part to the inclusion of a fifth weekend versus a year ago. More importantly, the recent strengthening in weekdays with the start of schools in many parts of the country serves as a positive indication that business travel is recovering and will help stabilize performance in the coming weeks and months. 

Global performance will remain healthy while slowing as summer comes to an end in the northern hemisphere. All indications are that China will continue to see soft performance.