STR Weekly Insights: 17-22 December, 23-30 December 2023, 31 December 2023-6 January 2024

Analysis by Isaac Collazo, Chris Klauda, Will Anns

Countries/Markets mentioned: China, Dubai, Europe, GCC (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates), London, Los Angeles, New Orleans, New York, Orlando, Paris, Rio de Janeiro, Singapore, Sydney, and the United States.

Highlights

• The hotel industry entered 2024 at somewhat normal performance levels with a handful of countries, including China, still in recovery mode.
• New Year’s Eve (NYE) 2023 was weaker than a year ago, but most of the softness came from the day shift (from Saturday in 2022 to Sunday in 2023).
• Across the four global regions, China showed the most dramatic improvement in revenue per available room (RevPAR), increasing 50% year over year (YoY) during the past four weeks.
• The Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE) exhibited healthy growth at the end of December after negative percentage changes earlier in the month due difficult year-over-year comparisons.
• Europe continued to post performance gains.
• The U.S. posted a typical end of year. Because the U.S. was one of the first countries to recover, YoY changes have had less to do with recovery and more with calendar shifts, including the move of the New Year’s Eve holiday from a historically strong Saturday in 2022 to the more muted Sunday in 2023.

U.S. closed the year in similar fashion
The U.S. saw healthy RevPAR growth (+6.4%) in the week ending 6 January 2024 following a decline of 10.1% in the prior week due to the shift of New Year’s Eve (NYE). Over the past four weeks, U.S. RevPAR was essentially unchanged compared to the same four weeks last year with average daily rate (ADR) increasing 1.4%, nearly offsetting an occupancy decline of 0.9 percentage points (ppts). During the past four weeks, and like most weeks of last year, the industry continued to be driven by the Top 25 Markets. RevPAR over the period was up 1.1% YoY, while the rest of the country decreased (-1.8%) on falling occupancy.

China still in recovery
While China saw impressive YoY growth throughout 2023, gains are beginning to moderate but held strong in the first week of 2024 (41%). As compared to 2019, occupancy is down 2.8ppts with ADR 3% higher than the benchmark year. RevPAR is 1.7% below 2019 results. China posting the largest YoY growth across the world regions is not surprising given the country was last to lift COVID restrictions and is still in recovery.

Europe normalized
It is safe to say that performance in Europe has normalized, and after a super summer with high leisure demand with increased travel from the U.S., RevPAR growth in the last four weeks slowed to +7.4%, remaining positive over the Christmas period.

Gulf Cooperation Council moves past tougher comparisons
RevPAR in the GCC has been on the upswing since mid-December after falling in the beginning of the month. The early December decrease was driven by ADR due to difficult comparisons to 2022 when Qatar hosted the World Cup. In 2023, the COP 28 took place in Dubai in early December with modest ADR.

New Year’s Eve impact
The most significant market mover during the holiday period is New Year’s Eve, which produces the highest absolute RevPAR of any December day in the U.S. and in most markets in the northern hemisphere.

The day of week on which the holiday occurs makes a big difference. Friday and Saturday traditionally show the largest year-over-year gains. This year the holiday fell on Sunday. NYE has fallen on a Sunday three times over the past two-plus decades (2000, 2006 and 2017). In the last two occurrences, occupancy fell 6.8 percentage points year over year. What’s fascinating, it’s still a three-day weekend for most individuals, given that Monday is the official holiday, but there is obviously less lure for a Sunday celebration versus Saturday. In fact, the highest occupancy ever seen for NYE was in 2016 (68.7%), a Saturday, and the lowest was in 2008 (52.7%), which fell on a Wednesday during the Great Recession. That of course excludes 2020.

This year, New Year’s Eve occupancy in the U.S. declined 6.1ppts year over year with ADR down 1.6%, resulting in RevPAR decreasing 11.0%. The decrease in performance was greater than what we had expected. However, there is a silver lining. Performance over the three-day holiday weekend (Friday through Sunday) was up as RevPAR increased 6.4% versus the NYE holiday weekend a year ago. Occupancy rose 2.4ppts and ADR was up 1.9%. This better performance was driven by Sunday’s growth. In Europe, both NYE and the three-day weekend contributed to a boost with RevPAR for the three-day weekend up 16%, while NYE was up 6%.

Performance varied across the major global cities with many being driven by events versus the actual holiday.

• New Orleans saw RevPAR increase by 26% YoY on NYE and by 20% over the 3-day weekend. The Sugar Bowl game between Washington and Texas was mostly responsible for the strong performance.
• RevPAR in Los Angeles grew 16% on NYE and 14% over the holiday weekend. Los Angeles benefited from an easier comp to last year when the Rose Bowl was held a day later.
• Sydney and Dubai posted double-digit RevPAR gains.
• Paris posted the highest ADR (US$586) of any global market, although that level was down 9%. The softness was likely due to a high-level security alert put on for NYE on the back of a terror event earlier in December. 
• Rio de Janeiro saw the second highest ADR of any global market (US$577), up 12%.
• New York and London took top honors for the three-day weekend with RevPAR gains over 20%. ADR (+21%) drove New York’s performance while occupancy increased 6%.  London was more balanced with ADR increasing 11% and occupancy up 8%.
• In Singapore, where December’s YoY performance was softer (RevPAR: -2.1%), NYE RevPAR rose 4.5% and 5.8% for the three-day weekend.
• Orlando posted a strong NYE three-day weekend while coming short of an increase for NYE with softer occupancy and ADR compared to last year.

Conclusion

After the dramatic swings seen across the globe over the past three years, hotel performance is settling into typical patterns. The industry’s three-legged stool of group, leisure and business is showing stability. Group business is expected to remain healthy based on the strong showing at the end of 2023. Leisure travel shows no sign of slowing, however the destination choice may shift as the domestic/international traveler mix for many countries resets, which will help some regions and slow others. The elusive business traveler is expected to continue growing in baby steps, however, most analysts are not predicting full recovery of traditional business travel but rather a shift in business travel patterns with remote workers, blended travel and the end of recession talk driving this segment forward. Welcome to 2024.