STR Weekly Insights: 7-13 July 2024

Analysis by Isaac Collazo, Chris Klauda, Will Anns

Countries/markets mentioned:

• United States: Houston, Minneapolis, New Orleans and Oahu
• Global: Indonesia (Bali, Borneo, Kalimantan), Germany (Dortmund, Munich)

Highlights

• U.S. RevPAR declined more severely than expected.
• Group demand was down significantly.
• Global RevPAR continues strong, exceeding US$100 for the fifth consecutive week.

Soft U.S. hotel performance across the board follows past patterns—but the decline was more severe.

Hotel performance declined more than expected with the greatest decrease taking place at the beginning of the week (Sunday-Tuesday) and the greatest impact occurring in the Top 25 Markets. A similar pattern was seen in 2019, which followed the same day-of-week calendar, although the decline this year was much more severe. In both 2019 and this year, the impact of July 4th occurring on Thursday reverberated into the following week, particularly the first couple days. All chain scales were impacted, indicating that this softening was endemic across the industry. Increasingly, we believe the rise of short-term rentals as a leisure alternative is impacting hotel demand. Additionally, strong outbound international travel is exacerbating the hotel demand decline in the U.S.  

The beginning of the week declined the most.

Falling occupancy pushed the week’s 5.2% decline in revenue per available room (RevPAR). Compared to last year, occupancy decreased 3.2 percentage points (ppts), while average daily rate (ADR) dropped 1.5%. The beginning of the week (Sunday-Tuesday) produced the largest decrease with RevPAR down 8.1% year over year (YoY), with occupancy down 4.1ppts and ADR decreasing 2.8%. In 2019, RevPAR dropped 2.7% for the week and 5.1% over the first three days.

Across the Top 25 Markets, RevPAR declined 7.2% YoY and 12.2% at the beginning of the week. The rest of the country saw RevPAR down 3.7% for the week and 6.2% for the first three days. In 2019, Top 25 Market RevPAR was down 4.3% YoY with Sunday-Tuesday down 7.9%. A similar pattern of greater declines in the beginning of the week occurred outside the Top 25 Markets.

No chain scale was immune.

All chain scales recorded RevPAR declines ranging from -9.3% in Luxury to -2.9% in Midscale. The top three chain scales (Luxury, Upper Upscale and Upscale) saw occupancy drop by 3+ ppts followed, in improving order, by the next three. The largest ADR and RevPAR declines were in Luxury, Upper Upscale and Economy hotels. The middle three, Upscale, Upper Midscale and Midscale, experienced ADR declines of less than 1%.

Group demand fell again.

Luxury and Upscale hotel group demand decreased 15.7% YoY. A similar decrease occurred in 2019 but not nearly as severe (-4.1%). The first three days of the week saw the largest YoY decline (-27.1%) with each subsequent day becoming less negative. This was the second consecutive week with falling group demand. It should be noted that the same outcome was seen last year, but like with the comparison to 2019, it was much less severe. Group ADR was one bright spot, up 2.3% YoY.

Most, but not all, markets suffered.

Bucking the aggregate trend of the Top 25 Markets, Houston, New Orleans, Oahu and Minneapolis posted double-digit RevPAR gains. Houston was affected by the outcome of Hurricane Beryl, while the other three markets were led by events and conferences. The first three days of the week were the biggest drag for all markets with 20 of the Top 25 Markets posting negative RevPAR percentage changes from Sunday through Tuesday.

Global RevPAR above US$100 for the fifth consecutive week

While global occupancy, excluding the U.S., fell for a second consecutive week (-1.0 ppts YoY), RevPAR increased 2.6% to US$105. This marked the fifth straight week that RevPAR eclipsed US$100. Growth was driven by a 4.2% YoY increase in ADR, despite the occupancy decline.

Among the largest global markets, Indonesia led with a 14.8% RevPAR gain driven by a 12.6% ADR increase. Leisure and tourism destinations saw the highest growth, including Bali where ADR grew 16.5%. Kalimantan saw a 10.5% ADR gain.

Germany, which hosted the two Euro semifinal matches, posted RevPAR growth of 10.5%. The matches, held in Munich and Dortmund, significantly boosted performance in these cities. Dortmund saw an occupancy gain of 17.1 ppts, however, across the whole week, Munich experienced a YoY occupancy decline of -5.8 ppts. Both cities recorded massive ADR percentage changes with Munich at +33.4% and Dortmund at +167.1%.

Looking ahead

The sharpness of this week’s RevPAR decrease was a surprise and serves to highlight the challenges the industry faces. Along with changing travel patterns, the industry is facing headwinds from short-term rentals and cruise travel along with an imbalance in outbound/inbound travel. We expect to see positive RevPAR comparisons in the week ending 20 July as business and group travel return. In addition, weekly occupancy is expected to reach its peak in the next several weeks followed by a slowing thereafter as the school year begins. One in four K-12 students will be back in class during the first full week of August.

The remainder of the world will continue to see slowing occupancy and strong ADR, benefitting from the strength of international travel.