STR Weekly Insights: 21-27 July 2024

Analysis by Isaac Collazo, Chris Klauda, Will Anns

Countries/markets mentioned: 

• United States: Atlanta, Chicago, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New Orleans, Philadelphia, San Diego and San Francisco
• Global: France (Île-de-France, Paris), United Kingdom (London)

Highlights

• Olympic impact for Paris hotels following patterns similar to London in 2012
• U.S. week-to-week occupancy decline greater than past years
• Sunday and Monday were still lifted by tech outage
• Healthy group demand in the U.S.

The industry reached the season turning point of the summer with U.S. occupancy falling after the previous week’s annual peak. While this seasonal decline was expected, it was greater than the decrease seen last year and in 2019. The previous week’s tech outage lifted performance for the first two days of the week, however, each day following slowed up to the largest decline on Saturday. This pattern occurred across all chain scales and was particularly evident in the Top 25 Markets, specifically—Atlanta, Chicago, Denver, Detroit and Minneapolis. Not surprising, airport hotels, housing travelers impacted by cancelled flights due to the outage, also benefitted. The bright spot of the week continued to be strong group performance, which showed increased demand and rate across both the Top 25 Markets and the rest of the country. 

Softer performance following summer’s peak

U.S. occupancy decreased 1.5 percentage points (ppts) from the peak achieved the prior week. This decline was greater than the week-over-week (WoW) decline seen last year (-0.6ppts) and in 2019 (-0.4ppts). Average daily rate (ADR) decreased 0.9% WoW, resulting in revenue per available room (RevPAR) down 3.0%. Compared to last year, ADR remained up 1.3%, resulting in a RevPAR gain of 0.9%. The Top 25 Markets continued to produce stronger metrics compared to the rest of the country with RevPAR up 1.4% YoY, which was the result of growth in both ADR (+1.1%) and occupancy (+ 0.3ppts). RevPAR for the rest of the country increased just 0.5% YoY. 

Final days of the tech outage impact 

Early in the week, certain industry appeared to benefit from the spillover demand caused by the previous Friday’s tech outage with Sunday posting the largest RevPAR increase (+2.6%) followed by Monday (+2.2%). Each subsequent day produced weaker RevPAR ending with Saturday down 1.5%. Airport hotels benefited the most with the YoY RevPAR progression from +9.9% on Sunday to +7.9% on Monday and then steadily declining through to Saturday (-4.9%). The five markets mentioned above recorded double-digit RevPAR growth on Sunday and all but Minneapolis continued double-digit RevPAR gains on Tuesday.

Upper Upscale strongest for the past four weeks

Bifurcation across the chain scales continued with RevPAR increasing for Upper Upscale (+2.2%) and Luxury (+1.1%). The next four chain scales steadily declined from -0.9% for Upscale to -2.2% for Economy. ADR performance was stronger than occupancy across all chain scales except Luxury, which was lifted by occupancy. All chain scales experienced positive YoY RevPAR comparisons on Sunday and Monday, except Economy. 

Over the past four weeks, chain scale performance was similar albeit more muted. Upper Upscale was the only chain scale producing positive RevPAR comparisons. The rest of the chains scale saw RevPAR declines ranging from -0.1% to -2.1% in order from Luxury to Economy. 

Strong group demand continued

Group demand in Luxury and Upscale hotels has increased in 22 of the past 28 weeks, producing an average increase of 4.4% YoY. This most recent group demand increase of 9.9% came with an ADR gain of 4.9%. Both the Top 25 Markets and all other markets supported this increase with group demand and ADR in the Top 25 Markets up 11.1% and 5.4%, respectively. All other markets posted a group demand gain of 8.7% with ADR up 4.2%. Eight of the Top 25 Markets experienced demand increases of over 20%, including Atlanta, Las Vegas, Los Angeles, Miami, New Orleans, Philadelphia, San Diego and San Francisco.

Transient performance across Luxury and Upper Upscale hotels softened year over year with demand down 1.2% and ADR basically flat at 0.2%. Over 28 weeks this year, transient demand has increased an average of 2.3% with 22 weeks with positive comparisons.

Gold medal performance in France

Global RevPAR reached a year-to-date high of US$112, up 9.4% YoY and driven almost exclusively by ADR (+8.6% YoY). Occupancy increased slightly (+0.5 ppts), reaching a 2024 high at 73.7%. 

During the week of the Olympics’ opening ceremony and the first full day of the games, France increased RevPAR 52.0% YoY, driven primarily by ADR (+50.7%). In Paris, occupancy for the week decreased (-5.7 ppts YoY), but ADR in the capital surged by 90.8%. This positive impact extended to the surrounding Île-de-France region, which saw an ADR gain of 83.4% YoY. On the Saturday night of the opening ceremony, Paris ADR increased 146% YoY with absolute ADR skyrocketing to US$951, while occupancy equally benefited, rising +15.8 ppts to 87.5%. 

A similar pattern was seen in London in 2012 during the first week of the games. There, occupancy fell 11.3 ppts while ADR increased 33.0% YoY. On the night of the opening ceremony in 2012, ADR increased 83% YoY, while occupancy remained almost flat, down 0.3 ppts to 85.0%. 

 Looking ahead

It would be fun to say the U.S. industry stuck the landing this week with the start of the Olympics, but realistically, it was more of a soft landing with economic pressures impacting the pocketbooks of some travelers, changing travel patterns and competition from other lodging sectors reshaping the industry. August will continue to soften as the school year begins across the U.S. and family travel ends. The healthy group performance seen this summer is a positive indication that September should be strong as fall conferences and events ramp up.

Global performance did stick the landing with Paris earning the gold. Over the next couple weeks, the global hotel industry is expected to remain strong and then slow, similar to the U.S., as schools start back up in September.