STR Weekly Insights: 8-14 September 2024

Analysis by Isaac Collazo, Chris Klauda, Will Anns

Countries/markets mentioned: 

• United States: Chicago, Indianapolis, Las Vegas, Miami, New Orleans, Anaheim (Orange County), San Francisco
• Global: Canada (Toronto and Vancouver), China (Chengdu, Guangdong, Hangzhou, Shenzhen), Indonesia (Bali, Northern Sumatra), Mexico (Mexico City, Yucatan/Campeche), Spain (Barcelona, Madrid) 

U.S. falls again

The week ending 14 September was sluggish for the U.S. hotel industry as revenue per available room (RevPAR) decreased for a second consecutive week—this time 1.4% year over year (YoY). Occupancy was down 1.1 percentage points (ppts) with the largest declines seen at the start of the week. Average daily rate (ADR) was almost flat YoY (+0.2%) and unchanged from the previous week. RevPAR comparisons turned positive during the weekend but at less than +1%. Rosh Hashana was on Saturday during last year’s comparable, so we expected stronger results. 

All chain scales reported RevPAR declines as did the Top 25 Markets (-1.7%), which saw nearly equal decreases in occupancy and ADR. The Top 25 Markets were significantly impacted by San Francisco, which hosted Dreamforce 2023, Salesforce’s mega event, during the comparable period a year ago. Excluding San Francisco, RevPAR for the remaining 24 markets was basically flat (+0.3%) on rising ADR and falling occupancy. Dreamforce 2024 occurs in the week ending 21 September, so we will see the positive side of that calendar shift. RevPAR for the remainder of U.S. markets as whole was down 1.2% driven by occupancy as ADR increased.

Calendar shifts impactful

As we have seen time and time before, shifts in holidays and events affect performance. Not only did San Francisco impact the Top 25, it also hurt total U.S. RevPAR. Excluding San Francisco, U.S. RevPAR comps were still negative but at a lesser rate (-0.5%) as occupancy dropped 1.1ppts while ADR rose 1.2%. San Francisco’s RevPAR declined 37.2%, all due to ADR (-36.7%). 

Las Vegas also experienced a slow week with RevPAR down 13.8%, partially because of the absence of the biennial PACK EXPO which took place during the matching week last year. Across the rest of the Top 25 Markets, Anaheim (Orange County) and Chicago posted the largest RevPAR gains of +25.5% and +20.5%, respectively, with Chicago lifted by the IMTS manufacturing conference and Orange Country hosting the RE+ 24 energy conference.

RevPAR down across all chain scales

RevPAR fell across all chain scales, ranging from -0.5% in Luxury to -3.7% in Economy. Occupancy decreased in all chain scales except Luxury (+2.4ppts). The occupancy gain was driven by hotels in Maui, Fort Lauderdale, and San Diego, where occupancy was up by more than 13ppts. While Luxury occupancy increased, ADR in the segment showed the largest decrease of any chain scale (-3.7%), with nearly half of the decrease coming from San Francisco.  

Upper Upscale showed the smallest occupancy decline (-0.3ppts), resulting in a 0.2 RevPAR decrease. Upscale followed with an occupancy decrease of 1.3ppts, resulting in a 1.1% decline in RevPAR. Occupancy declines across the bottom three chains scales ranged from -1.4ppts to -1.8ppts with RevPAR decreases between -2.0% to -3.7%. Economy was the only other chain scale besides Luxury to post an ADR decline (-1.2%). Room demand for economy hotels has fallen by 3.6% over the past three weeks, which is aligned with what we saw earlier this year.

U.S. group demand strong 

Group demand for Luxury and Upscale hotels (+1.5%) was a bright spot in a week that wasn’t good, as the level was the second highest of the year so far (2.2 million rooms). However, group ADR decreased 0.9%, also likely due to San Francisco. Last year, September and October saw the highest group room demand, and we expect the same this year. With the shift of the Jewish observances from September in 2023 to October in 2024, we believe the next two weeks will show strong group demand followed by a slight decrease in the first week of October (Rosh Hashana occurs on Thursday October 3). We believe the observance will be less impactful this year given the observance is at the end of the week versus the beginning or middle. Yom Kippur shouldn’t have a meaningful impact on group given it is on a Saturday this year. 

Weekly transient demand was up slightly (+0.5%) while ADR declined (-0.7%). During the fall months, transient demand generally follows the opposite pattern from group regarding calendar shifts although the impact is more subtle. 

Strong global performance continues into the September

Global RevPAR (excluding the U.S.) rose 5.6% on a 7.8% ADR gain. For the 13^th time this year, RevPAR surpassed the $100 threshold ($101 to be exact). Occupancy reached 70.2%, 1.5ppts below what it was in the same week of 2019.

Mexico, Spain, and Indonesia each saw strong RevPAR gains, exceeding 20%, primarily driven by ADR. Key markets in all three countries continued to see strong performance. In Mexico, standout markets included Mexico City, where RevPAR rose 71% on a 50.6% ADR gain. RevPAR in Yucatan/Campeche was up 31.1% via ADR (+20.7%). In all, eight of the 12 markets saw double-digit RevPAR growth, mostly via ADR.

In Spain, eight of the nine markets posted RevPAR increases with Barcelona leading at +37.5% and Madrid close behind at +31.4%. ADR in the country drove the gains, rising by 16.2%.

Indonesia also recorded significant growth, with Northern Sumatra up 62.4% and Bali up 26.8%. Like with Mexico and Spain, ADR was the growth driver with the measure up 15.9% for the country.

Weekly RevPAR in China fell 6.3%, due entirely to a 4.4ppt drop in occupancy with the measure at 65.4%. Each the country’s 10 largest markets experienced occupancy declines with Chengdu seeing the largest drop at -10.7ppts and Guangdong the smallest at -1.5ppts. After 29 weeks of consecutive decreases, ADR was flat and was mixed across markets ranging from a 13.9% gain in Shenzhen to an 8.3% decrease in Hangzhou.

Looking ahead

The week’s soft performance was somewhat unexpected, although explainable to a degree due to convention calendar shifts. We expect the rest of September to see better results buoyed by the results of Dreamforce and other conferences and events, but the month will be impacted by its composition, which includes one less weekend than a year ago. Early October will be soft as the Rosh Hashana observance takes place on Thursday, impacting some groups/meetings. Similar results are expected globally although we expect performance to continue its moderation as it returns to normal.