STR Weekly Insights: 2-8 June 2024

Analysis by Isaac Collazo, Chris Klauda, Will Anns

Countries/markets mentioned:

• United States: Houston, Las Vegas, New York, Orlando, San Diego, San Francisco, St. Louis
• Global: China, France, Germany (Berlin, Stuttgart), Italy (Rome, Milan), Mexico (Mexico City)

Highlights
 

• Top 25 Market weekdays boosted an otherwise lackluster week in the U.S.
• Group demand up but still below pre-pandemic comparable
• Global RevPAR increased on solid ADR gains with Germany taking top honors

It’s all about the Top 25 Markets

In the week ending 8 June 2024, U.S. revenue per available room (RevPAR) increased 1.7% year over year (YoY), driven entirely by a 1.8% lift in average daily rate (ADR). Like in past weeks, RevPAR growth was led entirely by the Top 25 Markets, where RevPAR was up 4.3% on both advancing occupancy and ADR (+1.5ppts and +2.2%, respectively). In contrast, the rest of the nation saw RevPAR retreat 0.3% on falling occupancy (-0.9ppts) with ADR up 1% YoY. Total U.S. occupancy reached 69.1%, which was the highest of the year so far but well below what was seen in the same week of 2019 (71.9%).

Weekdays (Monday – Wednesday) in the Top 25 Markets were especially strong with ADR up 3.5%, occupancy growing 1.9ppts, and RevPAR increasing 6.1%. Seven of the Top 25 Markets reported weekday RevPAR growth above 10%, led by San Diego (+26%) and followed by Orlando, San Francisco, Las Vegas, Houston, New York, and St. Louis. Room demand in the Top 25 Markets was the second highest since 2020. The highest level was reached five weeks ago (week ending 11 May 2024).

Las Vegas, which has seen sharp performance swings this year, also had a strong week. Comparable and reporting hotels saw RevPAR advance 15% on strong ADR (+6.9%) and occupancy gains (+5.5ppts). RevPAR from Tuesday through Friday increased by more than 20% each day.

Weekend (Friday – Saturday) and shoulder (Sunday & Thursday) days across the Top 25 Markets also produced positive comparisons with RevPAR up 2.7% and 3.0%, respectively.  

ADR impacted chain scale RevPAR performance—both positive and negative

Chain scale RevPAR continued to illustrate the bifurcation of the industry. RevPAR comparisons were positive from Luxury to Upper Midscale, but down in Midscale and Economy. ADR was on the rise in nearly all chain scales, but the growth was well below the rate of inflation with the strongest gain seen in Upscale (+1.6%).

While economy RevPAR was down for the 63rd time in the past 75 weeks, the decreases are lessening. Occupancy was almost flat (-0.3%), showing one of the smallest declines for the segment since it began to slow in March 2022. Economy chain scale occupancy declines have held at under 1% for the past three weeks.

In the Top 25 Markets, all chain scales, except Economy, posted RevPAR growth, led by Upscale, where the measure increased 3.2% YoY on occupancy gains. Economy Top 25 Market RevPAR was down 0.3% on falling ADR as occupancy was up.

Weekday RevPAR improved across all chain scales. Upper Upscale and Upscale chain scales saw the largest weekday RevPAR increase (+3%) followed by Luxury (+2%) and Upper Midscale (+1.2%). Midscale chains were flat. Economy chain RevPAR declined 1.8% which was less than the 2.4% decline seen for the week overall. Combined weekend and shoulder period RevPAR increased for Upper Upscale and Upscale just over 1% YOY and remained essentially flat for Luxury, Upper Midscale and Midscale, while decreasing 2.8% for Economy chains

All chain scales saw RevPAR growth on weekdays in the Top 25 Markets. Upscale RevPAR was up 5.2% with Upper Upscale and Upper Midscale seeing gains of 4.3% each.

Group demand up but still below pre pandemic

Luxury and Upscale hotel group demand increased more than 50% compared to the prior week and was up 0.9% compared to the same week last year. Group ADR grew 4.7% YoY, well above the current rate of inflation. Weekday and shoulder periods produced ADR increases of 5.0% and 4.9%, respectively while weekends increased 4.0%. The Top 25 Markets drove the group increase with occupancy up 0.6ppts, while group occupancy for the rest of the country declined 1.0ppts.

While group demand has been strong this year, the YTD figure remains 7% below what it was in 2019.The largest deficits are group nights on shoulder days and the weekend, which is more than 8% below 2019. Weekday has a deficit but its half of what it is on the other day categories.

Global

Global occupancy took a step back, falling by 0.7ppts. The decrease was widespread across the top countries. Occupancy in China fell 4ppts YoY with declines also seen in France and Italy. Even with the occupancy fall, global RevPAR was up 5.9% on solid ADR gains.

Among the top countries, the largest ADR increase was seen in Mexico, growing 11.5%. Within the country, Mexico City had a good week as ADR climbed 21.5% YoY and occupancy grew +9.ppts YoY.

Italy, which has seen strong performance for most of the year, saw a RevPAR decrease (-5.4%). The decrease was driven by falling occupancy (-2.7ppts) that was seen across all the major regions and cities (Rome: -2.8ppts and Milan: -5.2ppts). Performance was likely impacted by EU parliamentary elections, which took place over the weekend. Weekend occupancy in Italy fell by 6.3ppts YoY.

Germany was top across key countries in RevPAR growth (+17.7% YoY). Major biennial fairs, the Berlin Air Show, and LASYS in Stuttgart boosted the country’s overall performance.

China RevPAR was down 8.4%. This is likely attributable to the calendar shift in the public Dragon Boat Festival holiday occurring one week later this year. Typically, travel patterns change around this holiday as they did last year when the holiday was held 22-24 June. Occupancy fell week over week by 8.4ppts.

Looking ahead

Weekday performance in the Top 25 Markets lifted the metrics in an otherwise lackluster week. This pattern is moderately concerning given that the week’s performance was more a reflection of business travel, and the next couple months generally rely on more leisure travel, which was not reflected in other markets this week. One silver lining is the continued strong group performance which is expected to hold for the next three weeks before declining sharply over the 4th of July holiday week. Additionally, Economy chain hotel performance for the past couple weeks has been “less bad.”

Globally, hotel performance remains strong, boosted by healthy ADR increases, which remind us of the strong ADR performance experienced in the U.S. last summer. If what happened in the U.S. is a good predictor along with a strong summer schedule of sporting events (Olympics, Euro 2024, etc.) and concerts (Taylor Swift’s international tour), global hotel performance over the next couple months should remain solid.