STR Weekly Insights: 9-15 June 2024

Analysis by Isaac Collazo, Chris Klauda

Countries/markets mentioned:

• United States: Boston, Chicago, Denver, Detroit, Houston, San Francisco
• Global: Austria (Vienna), China, France, Germany, Indonesia, Ireland (Dublin), Italy (Milan), Japan, Netherlands (Amsterdam), Poland (Warsaw), Spain, Switzerland (Zurich), United Kingdom (Cardiff, Liverpool, London)

Highlights

• Weekdays in the U.S. Top 25 Markets lifted an otherwise tepid week.
• All U.S. chain scales benefited from the strong weekdays, Economy RevPAR still fell.
• Global RevPAR continued to grow, driven by ADR while occupancy cools.
• Taylor Swift’s Eras Tour will make a splash throughout Europe this summer.

Weekdays in the Top 25 Markets are still driving RevPAR

Recent growth in U.S. revenue per available room (RevPAR) paused, with a small increase (+0.3%) year over year (YoY) driven by a 0.9% lift in average daily rate (ADR). That gain was offset by an occupancy decrease of 0.4 percentage points (ppts).

The Top 25 Markets were fully responsible for the weekly growth as without them, RevPAR was down 0.9%. Weekdays (Monday-Wednesday) in the Top 25 Markets produced a RevPAR increase of 5.5% YoY. These markets have boosted the industry for the past six weeks. Like the overall industry number, weekday ADR was the main driver at +3.4%. The remainder of the markets also saw RevPAR increase during the weekdays (+2.8%), but that gain was insufficient to push the RevPAR comparison positive for the entire week.

In contrast, weekend (Friday & Saturday) RevPAR for both for the Top 25 Markets and all other markets declined (-3.9% and -5.6%, respectively). RevPAR comparisons have been negative for over half of all weekends since last year. Shoulder days (Sunday & Thursday) showed positive RevPAR comps for the Top 25 Markets (+2.1%) but were flat elsewhere (-0.1%).

Total U.S. occupancy reached 70.3%, which was the highest of the year so far but well below what was seen in the same week of 2019 (73.5%).

Top 25 Markets producing the strongest RevPAR growth were San Francisco (+30.3%), Houston (+18.1%) and Boston (+11.8%) with weekdays driving the week’s performance. RevPAR was on the rise in 17 of the Top 25 Markets, but only seven markets saw the measure grow in all day categories with weekend RevPAR the highest in Denver (+21.1%), Detroit (+9.4%), and Chicago (+6.5%).

Weekdays produced the best performance across all chain scales

Compared to the same week last year, chain scale RevPAR generally followed the bifurcated patterns seen over the past six months with the strongest performance at the top end and weakest performance at the bottom.

• Upper Upscale and Upscale posted the only RevPAR gains. Upper Upscale RevPAR at +2.6% YoY was a combination of increased ADR and occupancy, while Upscale RevPAR (+1.2%) was lifted by ADR (+0.9% YoY).
• Luxury took a step back posting a negative RevPAR comp (-0.7% YoY), the result of an ADR decline (-3.1%) outweighing an occupancy increase (+2.4%). Luxury segment ADR has been down in nearly all weeks of this year (20 of 24). This is most likely due to a mix shift on weekdays and changing travel patterns as outbound remains elevated.
• RevPAR in Upper Midscale hotels dropped 0.4% due to an occupancy decline, which offset an ADR increase (+0.4%).
• Midscale RevPAR also declined mostly due to occupancy declines, while Economy hotel RevPAR was impacted by both occupancy and ADR declines.

Weekday RevPAR was higher than overall weekly RevPAR for all chains scales with positive percentage changes for each, except Economy (-1.0%).

Group demand continues to improve, lifted by weekdays

Luxury and Upscale hotel group demand increased 3.2% compared to the same week last year. Once again, weekdays produced the strongest demand gains up 5.9%, followed by shoulder days (+1.9%). Group demand on weekends declined 1.6%.

Group ADR grew 2.4% YoY, which was the smallest increase seen in the past seven weeks, a possible indication that group pricing power is slowing as summer begins in earnest. Group ADR followed the day of week pattern for demand with weekdays up 3.2%, shoulder days up 2.7% and weekends basically flat at +0.3%.

While group demand has been strong this year, the YTD figure remains 6.5% below what it was in 2019.The largest deficits are group nights on shoulder days and on the weekend, which is 8% or more below 2019. Weekday has a deficit but its half of what it is on the other day categories.

Global

Global occupancy is starting to slow with occupancy down 2.0ppts YoY and essentially flat over the past four weeks. ADR continued to grow, increasing 8.4% YoY and 6.5% over the past four weeks. RevPAR for the week increased 5.4% YoY and has risen every week since March 2021.

Among the largest countries in terms of room supply, Japan, Spain, and Indonesia posted the strongest YoY RevPAR gains impacted almost entirely by ADR. Additionally, Taylor Swift’s Eras Tour helped lift RevPAR in a pair of U.K. markets: Liverpool (+43.8% YoY) and Edinburgh (+29.5%). She continues in the United Kingdom with stops London and Dublin.

France and China saw the largest RevPAR decreases among the largest countries, down by more than 11% each. The latter is likely due to the Dragon Boat Festival.

Looking ahead

Over the next two weeks, we expect hotel performance to see gains in occupancy and a leveling out of ADR. The week of July 4th (the holiday is on a Thursday this year) is expected to produce a drop in ADR with a more dramatic decrease in occupancy. Note, AAA is expecting record road trips, and the TSA also expects record travel during that time. The two weeks post July 4th should show a week-over-week increase in occupancy with the metric reaching its apex in the week ending July 20.

Globally, cities throughout Europe this summer will benefit from the Eras Tour with the above-mentioned cities plus Amsterdam, Zurich, Milan, three cities in Germany, Warsaw, and Vienna hosting the tour. Additionally, most key European cities will also benefit from increased travel by Americans. In May, outbound travel from the U.S. was up 11% overall.