U.S. hotel commentary - November 2023

Note: All financial figures presented in $.

Top-Line Metrics (percentage change from November 2022):
 

• Occupancy: 58.4% (-1.2%)
• Average daily rate (ADR): US$151.23 (+3.6%)
• Revenue per available room (RevPAR): US$88.36 (+2.4%)

Key points
 

• ​​​RevPAR grew as strong ADR growth offset an occupancy decline.
• ​​​​​​​With an extra lift from Las Vegas, national ADR growth surpassed CPI for the first month since May 2023
• Upper Upscale and Upscale chains lead in year-to-date performance growth.
• Group and transient demand grew at the same rate.
• New Year’s Eve bookings in the Top 25 Markets are just shy of 2022 levels. Q1 bookings are ahead of pace.

Year-over-year growth in RevPAR doubled to 2.4% compared to the 1.2% gain seen for October. The calendar was clean with equal numbers of weekdays and weekends, unlike the previous month when the calendar negatively impacted performance.

ADR growth (+3.6%) continued to drive the top-line with the measure matching the level seen in September. Additionally, ADR surpassed CPI for the first time since May. That strong growth was lifted by Las Vegas, which hosted the F1 Grand Prix. Excluding Las Vegas, U.S. ADR would have increased 2.5%. The contribution from Las Vegas was its largest since the beginning of the year.

As has been the case since April, occupancy continued to decline due to lower shoulder-day and weekend levels. Weekday occupancy was essentially flat year over year, supporting our projections of strengthening business and group travel. While less than the decrease seen in October (-1.2 percentage points), the decline in November occupancy (-0.7ppts) remained worse than what was seen from May through September. The majority of the decrease came from Economy class hotels, where occupancy decreased 2.5ppts for the month.

November group demand among Luxury and Upper Upscale hotels slowed versus October’s strong showing. Recall, October group demand was the highest of the past 60 months. While lower than that level, November group demand exceeded last year’s comparable with weekdays having the greatest impact, as has been the case since April. Group demand was below 2019 but not by much.

Year-to-date RevPAR growth came down from +5.5% in October to +5.3%. The downward trend is in line with STR’s November forecast update, which has full-year RevPAR growth of +4.8%. Despite the ups and downs of the year, hoteliers’ sentiment for 2024 continued to be positive with occupancy and ADR, to a larger extent, expected to improve in the new year. STR’s forecast reflects optimism as 2024 RevPAR is predicted to increase 4.1%, driven once again by ADR.

Chain Scales

The top three chain scales (Luxury through Upscale) have seen demand growth in every month of 2023. As compared to 2019, Luxury demand has been higher in every month this year, except August. Whereas for Upscale, demand has exceeded 2019 in nearly every month since early-2022. The same is true for Upper Midscale.

With relatively low supply growth, the top three chain scales have also reported occupancy growth in most months of this year, including November. The lower-tier chain scales, Midscale and Economy, have continued to post declining demand and occupancy.

November RevPAR percentage changes ranged from +4.3% in Upper Upscale to -5.5% in Economy. For most chain scales, YTD RevPAR growth is strong due to gains posted in Q1 against easy Omicron comparisons. From April to November, RevPAR change has ranged from +4.7% in Upscale to -4.3% in Economy. Upper Upscale has also seen RevPAR growth (+4.5%) during that period with Upper Midscale at +2.2%.

Segmentation

Reflecting seasonality, Luxury and Upper Upscale hotels saw group demand growth softened from the previous month while transient demand accelerated. Compared to 2022, both segments increased at relatively the same rate with weekdays leading occupancy gains. On the other hand, group demand was just shy of 2019 levels while transient demand has slowed relative to 2019 levels since August. In November, group demand was 2.2% less than 2019, while transient demand was 4.1% in arrears. ADR growth was strongest in the group segment with an increase of 7.2%. Transient ADR growth was 1.4%. Real (inflation-adjusted) transient ADR has remained greater than 2019 for all months of the year, while real Group ADR has been above 2019 since September.

Markets

Room demand in the Top 25 Markets grew while falling in all others, like it has since April. Weekday occupancy was up 0.4 ppts in the Top 25 Markets. The shoulder period was slightly down (-0.2ppts) while November weekends were flat. Given the demand decline across the rest of the markets, its occupancy pattern matched the Top 25 with weekdays showing the smallest decrease (-0.3ppts) with shoulder days (-1.1ppts) and weekends (-1.4ppts) down the most.

ADR growth in the Top 25 Markets has increased every month since July, resulting in RevPAR growth of 3% or higher with November posting the highest increase since May, boosted in part by the strong results in Las Vegas. Across the rest of the country, ADR growth has leveled out over the past two months but remained high enough to keep the RevPAR comparison positive in November (+0.3%).

Pipeline

The number of rooms under construction was flat as compared to October, which saw a large month-to-month increase. Like most of the year, the number of rooms under construction continued to trail 2022 (-1.1%) with many projects in a holding pattern as witnessed by the year-over-year gain in rooms in final planning rooms (+19%).

Pipeline leaders, Upscale and Upper Midscale, showed under construction rooms advance month over month as did nearly all chain scales except Upper Upscale and unaffiliated projects. Looking at hotels versus rooms, the number of properties under construction increased 3.2% versus last year with the largest gain in Economy (+31%). While the percentage is high, the number of economy hotels under construction is relatively low (81) versus 433 hotels in Upper Midscale and 271 in Upscale.

Overall, more than 713,000 rooms (6,000 hotels) sit in the pipeline with rooms up 17.1% from last year.

Latest Weekly Data

U.S. RevPAR for the week ending 16 December rose by the highest percentage of the previous three weeks, propelled by the Top 25 Markets. Group demand notably increased compared to the same period last year, even during what is traditionally a slower season. Read more here.