The U.S. hotel industry has been on a rollercoaster ride for the past eight weeks.
The week of Feb. 16-22 produced nearly flat (-0.3%) hotel revenue per available room following a 3.4% increase the previous week, a 2.8% decline the week before that, and a 4% gain three weeks ago. Several factors have been driving recent performance, including calendar shifts, the Super Bowl, recovery from the Los Angeles wildfires, and recovery from Hurricane Helene and Hurricane Milton.
Things cleared somewhat this week as the impact of most of these demand drivers lessened, which could be temporary or the start of a trend.
The 13 hurricane-affected markets in the Southeast U.S. saw hotel RevPAR rise 5.1%, which was the lowest increase since those Hurricane Helene and Hurricane Milton made landfall last fall. Over the past 22 weeks, hotel RevPAR in those markets has shown double-digit growth in all but two weeks. However, there is no doubt that growth rates are trending down.
Three Los Angeles submarkets – Pasadena/Glendale/Burbank, L.A. North and L.A. East – which have seen elevated hotel demand since the devasting fires began, continued to see elevated performance as RevPAR jumped 24.2%. The remainder of the greater Los Angeles market saw strong performance as well with RevPAR up 8.7%. A few highlights:
- Hotels in Hollywood/Beverly Hills, which have seen negative RevPAR comps since the fires, posted RevPAR growth of 9.5%.
- RevPAR in Los Angeles Central Business District rose 47% due in part to the 30th annual LA Art Show that was a week later this year, making for an easy comparison.
Las Vegas saw a negative RevPAR change this week due in part to a conference calendar shift. Because Las Vegas represents about 3% of all U.S. hotel supply, large changes in this market have a noticeable impact on national hotel performance.
The top 25 U.S. hotel markets, excluding Las Vegas, Los Angeles, Orange County and Tampa Bay, produced a 2.1% increase in RevPAR while hotels on “main street” – markets outside the Top 25 and excluding the 13 hurricane markets and two other LA fire impacted markets – saw RevPAR decline 1.8%. The gap between main street hotels compared to those in the top 25 markets has persisted for some time. Over the past four weeks, RevPAR has ranged from up 1.7% to down 1.3% in these markets. Keep in mind that in all of 2024, these markets only saw RevPAR growth of 0.9%. We will be paying close attention to the main street segment as the industry moves into this year’s spring and peak summer travel seasons as it represents more than 60% of U.S. hotels.
RevPAR on Presidents’ Day – Monday, Feb. 17 – and the preceding Sunday was up 3% year over year, boosted by Valentine’s Day on Friday at the start of the holiday weekend. A Valentine’s Friday or Saturday is nearly always a boost for U.S. hotel demand. Presidents’ Day occurred in the same week last year, so the only difference was Valentine’s Day. After the holiday, Tuesday’s RevPAR was flat, with steadily declining RevPAR starting on Wednesday and ending at the weekend close to 3% down.
Group demand flat overall but up in the top 25 hotel markets
Group demand in luxury and upper-upscale hotels decreased 0.8%, while ADR rose 4%. The top 25 markets posted solid group demand, up 2.3%, with ADR up 3.9%, led by Philadelphia, Los Angeles, Boston and Nashville. In the remainder of the country, group demand dropped 4.2%, but ADR grew 3.8%.
Transient performance was the opposite of the group segment as the top 25 markets saw demand decline 2.3% but ADR increase 2%. In the remaining markets, demand increased 5.4% and ADR grew 4.5%.
Luxury hotels led the way
RevPAR among the hotel chain scales ranged from up 7.2% among luxury hotels to down 2.6% for upper-midscale hotels. Economy and upper-midscale hotels followed with RevPAR declines of 2.1% and 1.4%, respectively, while upper-upscale was flat. Occupancy depressed RevPAR across all chain scales except luxury. The lingering impact of Hurricane Helene and Hurricane Milton continued to drive performance in the lower three tiers. Excluding the 13 hurricane markets, chain-scale differences were even more pronounced, with RevPAR ranging from up 7.8% in luxury to down 3.7% in economy hotels.
Holiday impact in the coming months
U.S. forward bookings for the week ending March 1 are above 2024’s level. March performance is expected to be stronger than last year as Easter moves to April this year versus March last year. Passover also occurs close to Easter this year, which was not the case last year. This compression of the two observances should benefit conference and group travel, as only one week will be off limits to planners versus two last year.
Global RevPAR returned with an occupancy lift from China
Excluding the U.S., global hotel occupancy reached 67.4%, up 4 percentage points. Hotels in China reported occupancy jumped 11.8 percentage points after the New Year holiday and thanks to an easy comp to last year’s celebration. Excluding China, global occupancy rose 1.2 percentage points, producing occupancy of 68.4% – the highest level of the year.
Across the 10 largest countries based on hotel supply, RevPAR was up in eight of them with growth ranging from 24.2% in Mexico to 3.5% in the U.K. China’s RevPAR was entirely due to occupancy gains while ADR retreated 8.1%. The top nine markets in China all posted double-digit RevPAR gains driven primarily by occupancy. Shanghai saw the greatest growth, lifted by both occupancy (+18.3 percentage points) and ADR (+10.4%).
Countries across the Middle East experienced strong hotel RevPAR gains in advance of Ramadan, which begins Feb. 28. The top five Middle East countries – United Arab Emirates, Saudi Arabia, Qatar, Oman and Jordan – posted RevPAR gains ranging from 6% in Qatar to 28% in the UAE. Occupancy averaged 82.7% across the region.
In the weeks ahead, the U.K. and Europe are also expected to benefit from the Easter/Passover shift. In the Middle East, the monthlong Ramadan observance will slow travel across the region. China is a wild card.
Isaac Collazo is senior director of analytics at STR. Chris Klauda is senior director of market insights at STR.
This article represents an interpretation of data collected by CoStar's hospitality analytics firm, STR. Please feel free to contact an editor with any questions or concerns. For more analysis of STR data, visit the data insights blog on STR.com.