STR Weekly Insights: 21-27 April 2024

Analysis by Isaac Collazo, Chris Klauda, Will Anns

Countries (markets) mentioned:

• United States: Detroit, Miami, Philadelphia, Seattle, Tampa
• Global: Australia (Adelaide, South Australia), Indonesia, United Kingdom (Aberdeen, Cardiff)

Highlights

• U.S. performance slowed due to the Passover observance.
• Top 25 Markets and Group demand impacted the most.
• Detroit was a standout due to the NFL Draft.
• Indonesia continues to grow occupancy
• LIV Golf 2024 in Adelaide propelled the city and surrounding south Australia.

Passover slows U.S. hotel industry

U.S. hotel performance paused due to the Passover observance that began on Monday 22 April. Revenue per available room (RevPAR) declined 2.5% as occupancy fell 0.8 percentage points (ppts) and average daily rate (ADR) declined 1.3%.

Performance over the past six weeks has been more unstable than in past years due to unusual calendar shifts. Typically, Passover and Easter overlap, but this year the two observances occurred weeks apart. Smoothing out this impact, over the past six weeks, RevPAR increased 1.4%, lifted far more by ADR (+1.3%) than occupancy (+0.4ppts). As of 27 April, YTD RevPAR was up 1.3% on ADR (+2.1%).

All chain scales saw RevPAR retreat with the largest declines in Luxury (-7.4%) and Upper Upscale (-5.8%), particularly in the Top 25 Markets. Upscale, Upper Midscale and Midscale Chains saw less of an impact with RevPAR declining between -1.4% and -0.8%. Economy hotels continued to see falling RevPAR (-4.5%), but the decreases have moderated somewhat from the beginning of the year. Falling occupancy has led most of Economy’s RevPAR declines, but over the fortnight, decreasing ADR has been the primary driver.

Over the past six weeks, the chain scales continued to perform as they did last year with RevPAR comparisons positive in Luxury (+1.2%), Upper Upscale (+2.0%), Upscale (+1.8%), and Upper Midscale (+0.9%). Midscale (+0.1%) and Economy have continued to struggle (-3.5%). For the year, RevPAR for Luxury and Upper Upscale hotels combined is up 3%, whereas Midscale & Economy is down 3.4%. Upscale and Upper Midscale RevPAR is nearly flat (+0.7%) with stronger performance in Upscale offset by Upper Midscale.     

The largest RevPAR decline was seen on Sunday (-7.1%), ahead of the Passover, which started on Monday. While down, RevPAR steadily improved as the week progressed with Thursday’s decrease the last of the week (-1.2%). The weekend (Friday & Saturday) produced positive RevPAR comparisons (+0.5%) for the first time since early-February (excluding the eclipse weekend). The increase was led by ADR (+0.8%). Occupancy was down, but the decrease was the smallest of the year, excluding the eclipse weekend.

Top 25 Markets impacted the most by Passover observance; group demand pauses

The Top 25 Markets saw the largest impact from Passover as RevPAR fell 5.1% with both ADR (-3.2%) and occupancy declining (-1.5ppts). As compared to the rest of the country, the day-of-week pattern was magnified with Sunday and Monday producing double-digit RevPAR declines. Tuesday through Thursday saw lessening RevPAR decreases with weekend RevPAR up slightly (+0.3%) with all of the gain coming from Friday (+1%).

While the week was slow, some markets saw double-digit RevPAR gains, including Detroit, which hosted the 2024 NFL Draft and saw RevPAR increase 25.6%. RevPAR was up significantly on Wednesday (+50%) and Thursday (+78.9%).

Other markets seeing strong RevPAR growth included Seattle (+21.6%), Tampa (+17.4%), Philadelphia (+15.8%), and Miami (+13.8%). The last half of the week drove most of the growth in those markets, except for Seattle, which increased every day. Gains in group demand drove the growth.

Group occupancy at Luxury and Upper Upscale hotels declined 3.3ppts. The Top 25 Markets decreased more than the rest of the country with occupancy down 4.8ppts versus 1.3ppts for the remainder of the country. Excluding the weeks that included New Year’s Eve, Easter and Passover, group demand has increased every week in 2024 and after rising nearly every week of 2023. Group is expected to grow up to the Memorial Day holiday, and based on Q1 earnings calls, it will likely exceed 2019 levels in coming weeks. Group ADR fell slightly (-0.7%), but in the prior three weeks, it was up 4% or more with more strong growth expected moving forward.

Global occupancy still rising

Occupancy for the largest countries, based on supply, was mostly up led by a 4.2ppt gain in Indonesia. At 69.5%, Indonesia’s occupancy was boosted by the capital, Jakarta, which increased 26.7ppts to 75.4%, as it rocketed back to pre-Ramadan levels. RevPAR for the country continued to be positive (+1.5%) with only one week this year showing a decline, attributable to the shift of Ramadan.

Australia saw equally impressive occupancy growth, up 4.1ppts YoY to 65.2%. Its performance was supported by Adelaide, which saw occupancy increase 14.8ppts YoY to 73.9% due to LIV Golf. ADR rose 18.8%. The event also helped the surrounding South Australian market where ADR increased 19.7%.

Softer occupancy was seen across the U.K., (-1.5ppts to 81.1%). Cardiff (-9.7ppts to 74.2%) and Aberdeen (-4.9ppts to 72.2%) were the most impacted as post-Easter holiday occupancy has grown slower than last year. London occupancy was down, with the decrease equal to the U.K.’s amount, but its absolute occupancy remained strong (85.6%). London’s ADR also fell (-1.7%) and its decline was more than the country’s overall decrease (-0.4%).

Looking Ahead

In the U.S. we expect a more normal performance pattern over the next four weeks as we close in on the summer travel season. Weekday and Group demand are expected to drive RevPAR over the period. There are headwinds for leisure travel as we near summer with consumer confidence falling and other indicators pointing to slower travel this summer, especially in middle-to-lower income households as the effects of inflation and higher debt costs squeeze disposable income. Outside of the U.S., the industry is in a much better state with demand continuing to recover.