STR Weekly Insights: 28 January – 3 February 2024

Analysis by Isaac Collazo, Chris Klauda, Will Anns

Countries (markets) mentioned:

• United States (Baltimore, Boston, Jackson, MS, Knoxville, Las Vegas, Miami, New York City, Oahu, Orlando, Phoenix, San Jose/Santa Cruz, Seattle)
• China, Indonesia, Italy (Rome, Milan), Japan (Tokyo), Singapore, Spain (Barcelona, Madrid)

Highlights
 

• Strong RevPAR growth in the U.S. Top 25 Markets, excluding Las Vegas.
• U.S. Group demand up for a fourth consecutive week.
• Global RevPAR shows no sign of slowing.
• U.K. aligning with historical patterns.
• Rome and Milan showing strong booking levels for the coming weeks.
• Japan led in RevPAR growth.
• Taylor Swift will likely drive growth in Asia Pacific markets.

U.S. Performance

U.S. hotels took an expected seasonal pause with occupancy 1.0 percentage points (ppts) lower compared to the prior week and flat from a year ago. This bridge week between January and February historically has produced a week-over-week decline. Even with this year’s decrease, average daily rate (ADR) continued to grow, up 1.9% year over year (YoY), resulting in a gain in revenue per available room (RevPAR) of 1.7%.

The Top 25 Markets had a more pronounced seasonal pause in occupancy, which was down 3.1ppts from the prior week. Compared to last year, occupancy was up (+0.8ppts) with ADR increasing 2.9% (just below the annual rate of inflation), lifting RevPAR 4.3%.

Excluding Las Vegas, which had a slow week ahead of Super Bowl festivities, the Top 25 saw RevPAR advance 6.5% YoY driven by growth in ADR (+3.8%) and occupancy (+1.6ppts). Weekdays (Monday-Wednesday) were especially strong in the Top 25 Markets (excluding Las Vegas) with RevPAR up 11.3% on strong ADR (+5.3%) and occupancy (+3.5ppts).

The rest of the country saw RevPAR decline 0.5% on falling occupancy (-0.6ppts) and weak ADR growth (+0.6%). RevPAR outside of the Top 25 Markets has fallen in every week of the year so far and in 28 of the past 30 weeks. The decreases continued to be focused in Economy class hotels with lesser contribution from Midscale class hotels.

Seven of the Top 25 Markets saw double-digit RevPAR increases, including Seattle (+27.5%), Boston (+17.9%) and Washington D.C. (+17.0%), lifted by a combination of occupancy and ADR increases. Oahu, New York City, Orlando, and Miami rounded out the list with each market seeing RevPAR gains driven by gains in both occupancy and ADR, except for Oahu, where RevPAR was driven exclusively by ADR. All seven markets also saw YoY growth in group demand.

As stated earlier, Las Vegas had a slow week ahead of the Super Bowl with RevPAR falling 9.3% YoY following significant growth in the prior week (+88.6%). Outside of the Top 25 Markets, Baltimore, Jackson, MS, San Jose/Santa Cruz, and Knoxville saw RevPAR increase by more than 20%+ YoY.

Group business gains

Group demand in Luxury and Upper Upscale hotels grew for the fourth consecutive week, increasing 10% compared to the same week last year and up 7.2% over the past four weeks. Group ADR has also increased, up 2.3% YoY and 6.4% over the past four weeks.

Seventeen of the Top 25 Markets saw year-over-year group occupancy gains, with several posting group occupancy of more than six percentage points above last year (Atlanta, Denver, Houston, Miami, Orlando, Phoenix, and Seattle).

Across the hotel classes, Upper Upscale and Upscale saw the strongest YoY RevPAR gains, up 5.4% and 4.8%, respectively, driven by occupancy. Luxury class hotels saw flat RevPAR (+0.3%) as occupancy grew (+0.7ppts) but ADR retreated (-1.2%). A week ago, these hotels saw RevPAR increase 12.1%, lifted by both ADR and occupancy. Luxury hotels are expected to see strong growth in the week ending 10 February, driven by Las Vegas with the Super Bowl. Upper Midscale hotels remained within one percent on all KPIs compared to last year, matching performance seen last week. Midscale and Economy hotels continued with RevPAR declines seen over the past months.

Global hotel performance

For the second straight week, the U.K. saw the highest occupancy (68.4%) across the top 10 countries outside of the U.S., posting an increase of 1.8ppts YoY as well as seeing an exact occupancy match to the day-to-day comparable year of 2018. If historical patterns continue, the U.K should see improving occupancy over the next three weeks. ADR also continued to grow, up 3.2% YoY to US$122 and resulting in a RevPAR gain of 6.1%.

Following on the heels of China‘s strong performance in the last few weeks, Indonesia saw RevPAR increase 23% YoY with occupancy at 60.9%, 4.3ppts ahead of 2023, and ADR advancing 14.4% to US$65. While there is not a large Chinese population in Indonesia, Chinese New Year celebrations are expected across the country, driving additional growth in the coming weeks.

Italy continues to see strong performance gains with some of its growth coming from inbound travel from American, which was up 35% versus 2022 and up 15% compared to 2019 according to the U.S. International Trade Administration I-92/APIS International Air Passenger Monitor. This week, occupancy increased 2.4ppts to 58.0% with ADR up 11.6% YoY to US$158. Over the next 90 days, the key cities of Rome and Milan show some of the highest average gains in occupancy on the books versus the same time last year (+4.7% and +7.0%, respectively).

Spain saw the largest occupancy growth of the top 10 countries as the measure grew 6.2ppts YoY to 65.8% due to events in Barcelona and Madrid. ADR increased 11.1%, and RevPAR was up 22.6% YoY.

Overall, eight out the top 10 countries posted YoY occupancy gains, while nine saw YoY RevPAR gains with six of the 10 reporting double-digit RevPAR growth led by Japan (+29.5%).

Looking ahead

RevPAR in 2024 is off to a weak start in the U.S., increasing just 1.7% over the past four weeks. The good news is that ADR has been solid over this period (+3.5%) and above the rate of inflation. Falling occupancy, however, has held the industry back. Demand in lower-tier hotels (Upper Midscale, Midscale and Economy) has fallen in most weeks across all three of those classes with the largest decreases in Economy (-5.5%). Demand is expected to steadily improve over the next several weeks as business and group travel return, reaching a seasonal peak in mid-March. However, the lower-tier, particularly Midscale and Economy, will likely not see an improvement soon. We still expect year-over-year occupancy changes to be less volatile than last year, with ADR growing, mainly from upper-tier hotels in the Top 25 Markets. Looking at the upcoming week’s data, the Super Bowl, which is predicted to have the highest ADR ever, will propel Las Vegas and impact the overall U.S., especially the Luxury segment.

Over the next two months, global performance will be driven by holidays, in particular Chinese New Year, sporting events, concerts (Taylor Swift’s international tour in Tokyo 7-10 February followed by stops in Australia and Singapore), conferences/conventions, and the change of seasons.

By the beginning of the second quarter, we expect double-digit global RevPAR growth to wane. Already this year, one of the five weeks had RevPAR growth under 10%, which will become more common as the year progresses.