U.S. hotel commentary - April 2024

Analysis by Jean-Claude Pedjeu and Chris Klauda

Top-Line Metrics (April 2024 vs. April 2023):
 

• Occupancy: 65.2% (+1.2%)
• Average daily rate (ADR): $157.31 (+0.8%)
• Revenue per available room (RevPAR): $102.51 (+2.0%)

Bottom-Line Metrics (April 2024 vs. April 2023):
 

• TRevPAR: $230.13 (+3.7%)
• GOPPAR: $87.54 (+0.8%)
• EBITDA PAR: $64.72 (+1.7%)
• LPAR: $75.15 (+7.0%)

Key Points

• April's RevPAR gain offset March’s decline. 
• Top 25 Markets driving YTD growth.
• Bifurcated chain scale performance: Upper tier up, lower tier down.

Overview

U.S. RevPAR rose 2% year over year (YoY) after declining in March (-2%). That loss then gain pattern can be partly attributed to the Easter calendar shift, which is why it is helpful to look at the two months together. Combining both March and April, RevPAR was flat (-0.1%), which represents a downward shift from January and February with RevPAR up more than 1%.

Notably, ADR showed little acceleration from March, up 0.8% versus 0.4% one month prior. Occupancy, however, was up 0.8 percentage points (ppts) after falling 1.6pts in March. All chain scales, except Economy, saw RevPAR advance in April. For the two months, only Upper Upscale and Upscale saw RevPAR advance, while Upper Midscale was flat. Unlike previous months, Las Vegas has no impact on April’s results with limited effect on the two-month average.

U.S. April YTD RevPAR grew 0.5% on a 1.6% gain in ADR offset by falling occupancy (-1.1%). April YTD saw the lowest RevPAR increase of any non-recessionary period. The previous low was for April YTD 2019 at 1.1%. With YTD ADR growth below the rate of inflation, real (inflation-adjusted) ADR fell 1.6% YoY and is 2.7% less than what it was in 2019. Excluding Las Vegas, YTD U.S. RevPAR was flat (0.1%) with occupancy falling more and ADR growing less.

Chain Scales

Because of the Easter shift, all chain scales, except Economy and Independent, saw occupancy rise in April. ADR also increased across most of the chain scales with only Luxury, Economy, and Independents posting declines. For March-April combined, occupancy and ADR showed a slight increase in Upper Upscale and Upscale chains, resulting in RevPAR growth of more than 1% for each chain. Luxury occupancy rose moderately (+3.2%) but was offset by an ADR decrease (-4.2%), which sank RevPAR (-1.2%). During the two months, and similar to the U.S., Upper Midscale chains saw relatively flat performance with occupancy down (-0.7%) and ADR up (+0.6%). The Economy chain scale posted the largest two-month RevPAR decrease (-5.2%) as both occupancy and ADR fell by like amounts. Midscale RevPAR was also down during the period but to a much lesser extent (-1.5%).

For April YTD, Upper Upscale and Upscale were the only chain scales with RevPAR growth (+2.7% and 1.2%, respectively). Demand was on the rise in Upper Upscale, via increased group business, but fell in Upscale. Both segments saw ADR gains; however, the growth rate was well below the rate of inflation.

Upper Midscale April YTD RevPAR was somewhat flat (-0.4%) due to declining occupancy, offset to some extent by growing ADR (+1.1%). Midscale and Economy have both seen falling RevPAR this year (-2.7% and -5.7%, respectively). Falling demand is driving the declines with waning ADR also contributing to Economy’s RevPAR decrease.

Falling room demand contrasts with other travel data and indicators, which point to a stronger year. The bifurcation observed (top three chains doing well while other chains struggle) in room demand could be a byproduct of a general economic squeeze on lower-to-middle-income travelers dealing with rising prices, increased debt load, debt costs (interest rates), and increased debt payment delinquencies. This cohort is a significant part of the Upper Midscale, Midscale, and Economy customer mix. They will continue to travel but less so than they have over the past two years.

Segmentation

In Luxury and Upper Upscale hotels, a notable consequence of the Easter calendar shift was evident in Group demand, which fell (-4.8%) in March and rose sharply in April (+12.4%). Transient demand showed a reverse pattern, going from growth of 4.5% in March to a decline of 0.5% in April. In the two months ending April, group demand was the highest since the start of the pandemic but still behind 2019. For the year, group demand is the 10th highest going all the way back to 2002. The highest group demand for April YTD was seen in 2019. ADR followed the patterns of demand with Group ADR growing 0.5% in March and 4.7% in April, whereas Transient ADR decelerated for the second consecutive month at -2.9% in April. 

Top 25 Markets

For the first time in more than a year, demand growth for the Top 25 Markets was neck-in-neck with the rest of the country at +1.8% YoY. It was also the second month in a row and in over a year that the Top 25 Markets trailed the rest of the country in ADR growth, showing a decline while the remainder of the country recorded an increase. As a result, the Top 25 Markets trailed the remainder of the country in RevPAR in April (+0.9% vs. +2.9%). On a positive note, the Top 25 Markets reversed the decline patterns observed in occupancy on shoulder days (Sunday and Thursday) and weekends (Friday and Saturday). Occupancy increased in all three day-part categories.

Aggregating March and April data, Top 25 Market occupancy was flat, whereas the remainder of the country was down 0.6ppts. ADR also fell in the Top 25 Markets (-0.5%) while growing elsewhere (+1.3%). As a result, Top 25 Market RevPAR was down for the two-month period (-0.6%) and flat in the remainder of the country (+0.3%). This was the first time in more than a year that markets outside of the Top 25 saw higher RevPAR growth.

The lower performance by the Top 25 Markets was across all day categories, particularly with a sharper RevPAR decrease on the weekends (-2.4% vs. -1.2%) and lower growth on weekdays (+0.7% vs. +1.1%) over the past two months.

Contrary to what we noted in recent months, Las Vegas had little to no impact on national performance in April. The market accounts for 2.9% of available rooms nationwide and 8.4% of available rooms in the Top 25 Markets. In April, Las Vegas RevPAR was basically flat (+0.2%) on decreasing occupancy and increasing ADR. This market has seen increased performance volatility this year due to the shift of large conferences and the inclusion of key events like the Super Bowl. Recall that April RevPAR for the Top 25 Markets was up 0.9% when including Las Vegas. Excluding Las Vegas, RevPAR was nearly identical (+1.0%). The same was true for the U.S.

Six of the Top 25 Markets saw RevPAR growth above 10%, led by Philadelphia, Phoenix, and Detroit while Los Angeles, Orlando, and San Francisco/San Mateo lagged.

Pipeline

For a second consecutive month, the number of rooms under construction increased year over year. Pipeline leaders, Upscale and Upper Midscale, continued their dominance and accounted for a little more than 50% of all rooms under construction. However, the pace of pipeline activity in these segments has declined compared to 2022. Rooms under construction in the two segments have also slowed compared to last year, while Midscale and Economy rooms under construction increased.

Projects in planning continue to grow with rooms in final planning up 9.2% and planning increasing 34.2%, down from +39.5% in March. Overall, more than 752,000 rooms (6,374 hotels) sit in the pipeline with total rooms up 18.6% from last year. 

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