U.S. hotel commentary - September 2023

September 2023 Top-Line Metrics (percentage change from September 2022):
 

• Occupancy: 66.2% (-0.5%)
• Average daily rate (ADR): US$160.18 (+3.5%)
• Revenue per available room (RevPAR): US$106.07 (+2.9%)

September 2023 Bottom-Line Metrics (percentage change from September 2022):
 

• GOPPAR: US$82.82 (flat)
• TRevPAR: US$220.63 (+1.2%)
• EBITDA PAR: US$61.22 (+2.8%) 
• LPAR: US$72.47 (+4.5%)

Key points
 

• RevPAR growth accelerated, led by strong ADR increases.
• Total U.S. demand declined 0.2%, but Luxury, Upper Upscale, Upscale, and Upper Midscale chains continued to improve demand relative to 2022.
• Growth in transient demand outpaced group with increases in transient weekend occupancy and declines in group weekend occupancy.
• Top 25 Market demand continued to climb year over year, despite a difficult comparison to 2022, as Yom Kippur tempered business travel into major markets late in the month.
• The number of rooms under construction continued to decline year over year, remaining below the medium-term average.

U.S. hotel revenue per available room (RevPAR) rose 2.9% in September 2023, which was the strongest year-over-year (YoY) growth of the quarter, even as occupancy continued to decline modestly.

Occupancy dropped 0.5%, or about 0.4 percentage points, relative to September 2022 as demand remained basically flat (-0.2%) for the fifth consecutive month.

However, average daily rate (ADR) increased a respectable 3.5%, just behind inflation, despite the decline in occupancy. September’s strong rate growth suggests that hoteliers remain optimistic in the face of continued demand declines, supporting the theory that 2023’s lackluster demand growth is largely caused by the normalization of demand drivers.

Top 25 Market occupancy on the books is presently running about two percentage points ahead of same time last year for the next 90 days (16 Sep 2023 – 13 Jan 2024), so expect more of the same in demand trends through year-end.

Chain Scales

Demand continued to rise across the top four chain scales, with Luxury down through Upper Midscale hotel chains reporting accelerating demand growth. Three of the four chains – Luxury, Upper Upscale, and Upscale – reported occupancy growth as well.

However, while Upper Midscale demand increased 1.2% year over year, new supply once again outpaced demand and caused segment occupancy to decline modestly relative to 2022.

Segmentation

Transient demand outgrew group demand for the fourth consecutive month. Transient demand strengthened off more high-end leisure travel in the U.S., as weekend occupancy increased year over year once again.

Group occupancy continues to be weighed down by weekend occupancy declines, although weekday groups continue to rebound.

Markets

Top 25 Market demand increased year over year once more, although the growth decelerated to just +0.9% in September. Part of the slowdown in September likely came from the shift in Jewish holidays. While Rosh Hashanah shifted weeks within September, Yom Kippur fell in September 2023 vs. October 2022.

Business travel typically slows during holiday weeks, meaning that September had two weeks of slower demand this year, compared to only one week last year. Likewise, however, the first week of October 2023 was an easier comparable for the Top 25 Markets and any other business-driven segments.

Pipeline

The volume of rooms under construction continues to decline year over year, as did early Planning phase rooms.