STR Weekly Insights: 26 May – 1 June 2024

Analysis by Isaac Collazo, Chris Klauda, Will Anns

Countries/markets mentioned:

• United States: Chicago, Dallas, Houston, Las Vegas, New Orleans, New York, Orlando
• Global: Germany (Dusseldorf), Spain (Madrid), United Kingdom

Highlights
 

• Low RevPAR growth
• Upper Upscale hotels did best
• Storms impacted performance across Texas
• Madrid enjoyed a Taylor Swift boost

Modest Memorial Day week performance

U.S. hotel performance over the week of Memorial Day (ending 1 June 2024) showed a modest 1.0% increase in revenue per available room (RevPAR), all from occupancy, as average daily rate (ADR) was essentially unchanged (+0.1%). The Top 25 Markets amplified this pattern with occupancy increasing 1.6ppts YoY, while ADR for those markets decreased 0.5%, netting RevPAR growth of 2.0%.

By day of week, RevPAR showed robust growth on Tuesday and Wednesday, with the measure increasing 5.9% and 4.8%, respectively. Occupancy led the gain, but ADR was also on the rise (+2.1% in each of the two days). Over the last four weeks, weekday (Monday-Wednesday) RevPAR has grown by 6.9% nationwide and 10.4% in the Top 25 Markets. However, as seen in many weeks this year, weekend RevPAR fell by more than 1.7% mostly due to a drop in occupancy.

Occupancy over the three-day Memorial Day weekend (Friday, 24 to Sunday, 26 May) was almost identical to Memorial Day weekend last year (72.5% TY vs. 72.0% LY). Like last year, holiday weekend ADR declined (-0.2% TY vs. -0.5% LY). The Top 25 Markets saw slightly stronger Memorial Day weekend occupancy (+1.0ppts) compared to last year with a pronounced ADR decline (-0.8%).

Occupancy drove performance

Upper Upscale chains saw the largest RevPAR gain (+2.2%), a result of occupancy (+1.5ppts) as ADR decreased slightly. Luxury RevPAR was the next highest (+1.9%) on solid gains in occupancy (+3.6ppts) but with a sharp decrease in ADR (-4.0%). Occupancy growth in Luxury has been particularly strong for the past four weeks. Taking a closer look, most markets (54%) have seen Luxury occupancy increase by more than three percentage points during that time, while rates have fallen or remained flat. Of the 478 U.S. luxury hotels that were operating both this week and the same week last year, 61% saw ADR fall with more than a quarter seeing decreases of 10% or more.

Upscale and Upper Midscale hotels also posted positive RevPAR comparisons for the week, +1.3% and +0.5%, respectively, both growing on occupancy. Midscale and Economy saw continued RevPAR decreases with the decline in Economy nearing -4%

The three-day Memorial Day weekend followed the same occupancy-led performance stated above. However, only Luxury and Upper Upscale hotels saw RevPAR advance with all others declining due mainly to falling ADR.

Group demand paused

Group demand at Luxury and Upper Upscale class hotels took a step back, declining 2.7% following four weeks of robust growth, but ADR remained strong (+5.3%). The Top 25 Markets saw a greater decline in occupancy and a smaller increase in ADR compared to the rest of the country. The latter has seen strong group performance over the past two weeks, perhaps influenced by more leisure-oriented groups such as weddings, graduation celebrations, and other family-oriented events.

Storms impacted performance across Texas

Markets that saw some of the highest RevPAR increases this past week were also those impacted by severe storms, flooding, and tornados. Dallas and Houston experienced double-digit RevPAR gains with the largest increases during mid-week as the storms moved though the areas. New Orleans recorded the third highest RevPAR increase across all U.S. markets.  Of the country’s four largest markets, Las Vegas and New York City saw RevPAR gains of 8.8% and 4.8%, respectively, with Las Vegas driven by ADR (+7.4%) and New York boosted by occupancy (+3ppts). Orlando and Chicago experienced RevPAR declines of -2.8% and -3.4% with Orlando impacted by both ADR (-1.1%) and occupancy (-1.1ppts) decreases. Chicago recorded an ADR decrease (+3.4%), whereas occupancy increased 1.0ppts.  

Spain tops global performance helped by, you guessed it, Taylor Swift

Outside of the U.S., Spain led the key hotel markets as RevPAR increased 22.5%. Taylor Swift’s concerts in Madrid (29-30 May) helped propel weekly results in the city with occupancy rising 9.1ppts to 86.5% and ADR increasing 38%. Spain has seen significant ADR increases, averaging 10.3% for the year so far, while occupancy has been 3.5ppts higher than last year on average. 

Germany also posted a high RevPAR gain (+21.8%), mostly attributable to the calendar shifts of holidays and trade fair. In the most recent week, Dusseldorf hosted Drupa, a printing technology trade fare that attracted 260,000 visitors. Occupancy in Dusseldorf increased 4.8ppts to 67.6%. As compared to 2018, the last time the trade fare was in the city, occupancy was down 1.0ppts.

Performance in the U.K. was mixed as the week included school holidays for most of the country. ADR increased 2.2%, while occupancy fell marginally (-0.7ppts to 80.3%). London occupancy was down
2.0ppts to 79.3%, while the rest of the U.K. saw a smaller decline (-0.3ppts to 80.6%). With an election date set for 4 July, performance across Regional U.K. will likely increase in the weeks ahead as MPs make their way around the country.

Looking Ahead

Data from the month of May is expected to yield positive results for the industry with RevPAR estimated to increase 4.2% due to ADR up 2.7% and occupancy up 1ppts. The inclusion of an extra Friday this month provided a small boost to performance as Friday is historically a stronger performing day of the week. The last week in June looks to be strong based on Forward STAR bookings. The week of 4 July is impacted by the shift in the holiday from Tuesday last year to Thursday this year. This shift should favor travelers getting an early start on the weekend.

For the rest of the summer, we will be watching performance carefully. Inflation and declining savings are having a compounded impact on middle- and lower-income travelers, likely resulting in reduced and trade-down on travel. At the same time, TSA screenings at airports continue to reach record levels, which is partially a result of Americans traveling internationally at a greater rate than international travelers visiting the U.S. is also a factor.