U.S. hotel commentary - September 2024

Analysis by Chris Klauda

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

• Occupancy: 64.6% (-2.5%)
• Average daily rate (ADR): US$162.63 (+1.2%)
• Revenue per available room (RevPAR): US$105.04 (-1.3%)

Key Points

• RevPAR impacted by calendar composition
• Group demand tops 2019 comparable
• Industry and chain scales led by Top 25 Markets
• Planning phases push pipeline up for a sixth consecutive month

Overview

U.S. RevPAR decreased 1.3% year over year (YoY) in September following a robust August which followed a lackluster July. The primary reason for the decline was the change in the calendar composition of the month. September 2024 had one less weekend (Friday & Saturday) and an extra Sunday and Monday when compared to 2023. It was anticipated that the calendar shift of the Jewish observances of Rosh Hashanah and Yom Kippur from September in 2023 to October in 2024 would lift performance comparisons, and while there was some benefit on the group side, it was not enough to offset the impact of one less weekend. Even though overall September room demand was down, group room demand among Luxury and Upper Upscale hotels did exceed 2019. 

Falling occupancy caused the RevPAR decline as 1.2% growth in average daily rate (ADR) was insufficient to lift RevPAR into positive territory. Weekday (Monday-Wednesday) RevPAR increased 2.6% on ADR (+3.1%). Shoulder (Sunday & Thursday) and weekend RevPAR decreased on falling occupancy as ADR was up around 1.2%. 

The composition of the month really matters as weekend RevPAR in September was $38 higher than the RevPAR seen on Sunday and Monday. The difference comes mostly from ADR (+$21), but occupancy was also higher on the weekend (+15 percentage points). Recall, in August, we also attributed strong growth to calendar composition because of an extra weekend versus the previous year. Combining both August and September, RevPAR was weak, increasing by only 1.4%, all on ADR (+1.8%) as occupancy fell. Demand was flat compared to the same two months in 2023 with supply rising 0.5%.

Chain Scales

The top two chain scales (Luxury, and Upper Upscale) saw positive RevPAR comparisons, lifted almost exclusively by ADR, except Luxury hotels which also saw an occupancy increase. Additionally, the growth of these chain scales was entirely due to growth within the Top 25 Markets. Again, Luxury was an exception as it saw growth in and out of the Top 25 Markets. It is also important to note that Luxury is seeing a resurgence as this was the second consecutive month of RevPAR growth following over a year and a half of negative RevPAR. RevPAR in the remaining four chain scales (Upscale, Upper Midscale, Midscale, and Economy) fell due to sharper occupancy losses.   

For the quarter, Luxury and Upper Upscale saw RevPAR increase by more than 2% with Upscale at +1.3% and Upper Midscale at +0.4%. Midscale RevPAR was down 0.4% and Economy fell 2.4%. September YTD results continued to reflect a bifurcated industry. Luxury RevPAR increased 1.0% with the next five chains scales ranging from +2.9% to -3.6%.

Segmentation

Monthly group demand was well ahead of 2023 lifted by the Jewish calendar shift from September 2023 to October 2024. Notable is the 2024 increase compared to 2019 when the Jewish calendar shift is generally not in play with most of the holidays in October (Rosh Hashana in 2019 began Sunday, 29 September). Conference and event calendars across all the top convention cities were strong. Most notable was New York City, hosting the U.N. General Assembly, producing an industry moving week that contributed 3.7 percentage points (ppts) to the national growth rate in the week ending 28 September. When group is up, transient is often down, and this was the case in September. Transient demand was below 2023 levels while above 2019. ADR increased for both group and transient with the gap closing between the two segments.

Top 25 Markets

As has been the case for most of the year, the Top 25 Markets outperformed the rest of industry with RevPAR up 1.2% on ADR (+2.8%). The remaining markets saw RevPAR decline (-3.2%) because of declining occupancy (-3.0%). Half of the Top 25 Markets posted RevPAR gains with Houston (+13.3%), Chicago (+10%), and Anaheim (+7.1%) seeing the largest gains. New York City RevPAR was up 5.4% in the month, and the city also had the highest absolute RevPAR of any market ($363), which was lifted by the United Nations General Assembly meeting which took place 22-23 September 2024. In the week of the meeting, NYC’s RevPAR was up 70.1% on a 52.8% ADR increase. 

Houston has seen five consecutive months of strong RevPAR growth. Several factors driving Houston’s performance include a busy events calendar across the market, recovery/rebuilding efforts following widespread flooding in May and July, and a strong energy industry. Even with the double-digit growth, Houston still had the lowest absolute RevPAR ($77) of the Top 25 Markets. Thus, the high growth rate is due to a low base. In absolute dollars, Houston’s 13.3% gain is equal to a $9 increase whereas Chicago’s 10% growth added $13 to its RevPAR.

Pipeline

The number of rooms under construction increased 7% year over year, its seventh consecutive monthly increase. In absolute terms, 10,200 more rooms are under construction today than a year ago with largest increase seen in Midscale (3,800) and those unaffiliated (3,300). The number of rooms under construction in Upper Midscale decreased by nearly 2,000 rooms. Rooms in the planning phases continued to grow with final planning up 10.4% and planning increasing by 38.4%. More than 761,648 rooms (6,412 hotels) are in the pipeline, up 20.4% from last year. Upscale and Upper Midscale chains continued to lead in construction, accounting for nearly half of all rooms in that phase.

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