U.S. hotel commentary - July 2024

Analysis by Jean-Claude Pedjeu and Chris Klauda

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

• Occupancy: 68.8% (-0.5%)
• Average daily rate (ADR): US$161.69 (+0.5%)
• Revenue per available room (RevPAR): US$111.18 (flat)

Key Points
 

• Flat RevPAR 
• Bifurcation among chain scale performance continued
• Top 25 Markets continued to outperform the rest of the country
• Pipeline growth steady with the number of rooms in construction up, fifth month running

Overview

After three months of year-over-year growth, U.S. RevPAR was flat (0.0%) compared with last July. The result was due to falling occupancy (-0.5%), which was not offset by a small gain (+0.5%) in ADR.  The Top 25 Markets saw some growth (+0.5%), but the increase did not rise to the level of Q2 and was not enough to erase decreases in the remaining markets (-0.4%). Chain scale results remained bifurcated with the upper tier (Luxury, Upper Upscale and Upscale) posting gains of 1.6% and the remaining chains scales falling by the same amount in aggregate. 

A portion of the muted growth can be traced back to the composition of the month, with four Sundays and Saturdays this year versus five last year. That shift meant $1.3 billion less in revenues. This July included an extra Tuesday and Wednesday, but those two days only contributed $1.2 billion in revenues, resulting in a shortfall for the month. Additionally, the week after the July 4th holiday (ending 7 July) was particularly weak versus the same week in July 2023 with RevPAR declining 4.7% and revenues down $23 million.

Chain Scales

The lackluster July RevPAR performance was observable across almost all chain scales. Luxury chains continued to see strong demand growth outpacing supply, resulting in steady occupancy growth in 16 of the past 19 months. On the other hand, Luxury chain ADR decreased again (-2.1%) in July. On the other end, April and May improvements in Economy chain RevPAR declines were short-lived as the segment was down 3.3% in July after a 2.6% decrease in June. The notion of bifurcation in the U.S. hospitality industry was well on display in July’s occupancy as each of the top three chains recorded an increase, while the lower chains declined. However, in terms of RevPAR performance, this notion is only seen in Upper Upscale and Upscale chains since the Luxury segment has only registered a meaningful increase once this year (May: +5.0%) despite continued high rooms demand.   

Segmentation

Transient demand growth for hotels in the Luxury and Upper Upscale classes decelerated in July (+0.4%) after strong increases in May (+4.0%) and in June (+3.2%). On the other hand, Group demand accelerated (+3.6%) after a strong April (+12.4%) and May (+4.8%) then a flat June (0.0%). The shift of Independence Day from a Tuesday in 2023 to a Thursday in 2024, along with the tradeoff of a Saturday and a Sunday for an extra Tuesday and Wednesday, appear to have impacted both transient and Group demand. July 2024 transient demand increased (+0.4%) vs July 2023 (+3.7%). July 2024 group demand increased (+3.6%) vs. July 2023 (+0.2%).

Group ADR, which has produced positive comparisons for the past 19 months (except March 2024), continued the streak in July (+3.9%). Transient ADR has leveled out over the past 19 months with July Transient ADR at -1.1%. 

Top 25 Markets

Demand growth for the Top 25 Markets (+0.8%) maintained a lead over all other markets (-0.5%) despite decelerating for the second month in the row. May was at +3.4% and June at +1.7%. While demand is up, the Top 25 Markets trailed the remaining markets in ADR growth for the fifth consecutive month. The Top 25 Markets outperformed the remainder of the country in RevPAR (+0.5% vs. -0.4%) thanks to the strong demand growth.

Occupancy in the Top 25 Markets increased 1.4% on shoulder days (Sunday & Thursday) and +0.8% on weekends (Friday & Saturday), with no growth on weekdays (Monday – Wednesday). The weekday results were impacted by lower occupancy during the first two weeks of July. 

Strong RevPAR performance in the Top 25 Markets was led by Houston, New Orleans, and Minneapolis. After a disappointing April (-3.4%), Houston has seen three consecutive months of outstanding RevPAR growth (+15.5% in May, +16.4% in June, and +37.4% in July). Houston’s performance has been driven in part by recovery from Hurricane Beryl, which led to resident displacement as well as crews coming into the market to assist with rebuilding efforts. New Orleans posted a huge shift this month moving from the bottom of Top 25 Markets in RevPAR performance in June (-13.7%) to second place in July (+17.4%).

Pipeline

The number of rooms under construction increased for the fifth consecutive month (+5.3% YoY). Upscale and Upper Midscale chains continued to lead in construction, accounting for 49.5% of all rooms in the final phase of the pipeline. Rooms under construction in these two segments have slowed compared to last year (+2.5% and -5.3%, respectively). Rooms in the planning phases continue to grow with final planning up 9.1% and planning increasing 39.3%. More than 761,534 rooms (6,416 hotels) sit in the pipeline, up 19.6% from last year.  

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