Hotel performance on weekdays was a major standout for the U.S. hotel industry in the first full week of June.
In the week ending June 8, U.S. revenue per available room (RevPAR) increased 1.7% year over year, driven entirely by a 1.8% lift in average daily rate. Like in past weeks, RevPAR growth was led entirely by the top 25 markets, where RevPAR rose 4.3% thanks to 1.5-percentage-point occupancy growth and a 2.2% ADR increase. In contrast, the rest of the nation saw RevPAR retreat 0.3% as a result of occupancy falling 0.9 percentage points with ADR up 1% year over year. Total U.S. occupancy reached 69.1%, which was the highest of the year so far but well below the 71.9% occupancy that was seen in the same week of 2019.
Weekdays from Monday to Wednesday in the top 25 U.S. hotel markets were especially strong, with ADR up 3.5%, occupancy growing 1.9 percentage points and RevPAR increasing 6.1%. Seven of the top 25 markets reported weekday RevPAR growth above 10%, led by San Diego — which grew 26% — and followed by Orlando, San Francisco, Las Vegas, Houston, New York and St. Louis. Room demand in the top 25 markets was the second highest since 2020. Room demand reached its highest level five weeks ago in the week ending May 11.
Las Vegas, which has seen sharp performance swings this year, also had a strong week. Comparable and reporting hotels saw RevPAR advance 15% on strong ADR growth of 6.9% and an occupancy gain of 5.5 percentage points. RevPAR from Tuesday through Friday increased by more than 20% each day.
Across the top 25 U.S. hotel markets, weekend days — Friday and Saturday — and shoulder days — Sunday and Thursday — also produced positive comparisons, with RevPAR up 2.7% and 3.0%, respectively.
Average Daily Rate a Double-Edged Sword for Hotel Chain Scales
RevPAR among the hotel chain scales continued to illustrate the bifurcation of the industry. RevPAR comparisons were positive from the luxury to upper-midscale segments but down in midscale and economy hotels. ADR was on the rise in nearly all chain scales, but the growth was well below the rate of inflation with the strongest gain seen in upscale hotels (+1.6%).
While economy hotel RevPAR was down for the 63rd time in the past 75 weeks, the decreases are lessening. Occupancy was almost flat, down just 0.3%, and is showing one of the smallest declines for the economy hotel segment since it began to slow in March 2022. Occupancy declines in the economy chain scale have held at under 1% for the past three weeks.
In the top 25 U.S. hotel markets, all chain scales, except economy hotels, posted RevPAR growth. Upscale hotels led the way, with RevPAR up 3.2% year over year on occupancy gains. Economy hotels in the top 25 markets saw RevPAR down 0.3% on falling ADR as occupancy was up.
Weekday RevPAR improved across all chain scales. Upper-upscale and upscale chain scales saw the largest weekday RevPAR increase (+3%) followed by luxury hotels (+2%) and the upper-midscale segment, which rose 1.2%. Midscale chains were flat. Economy chain RevPAR declined 1.8%, which was less than the 2.4% decline seen for the week overall. Combined weekend and shoulder period RevPAR increased for upper-upscale and upscale hotels by just over 1% year over year and remained essentially flat for luxury, upper-midscale and midscale, while decreasing 2.8% for economy hotels.
All chain scales saw RevPAR growth on weekdays in the top 25 markets. Upscale RevPAR was up 5.2% with upper upscale and upper midscale seeing gains of 4.3% each.
Group Demand Up but Still Below Pre-Pandemic
Luxury and upscale hotel group demand increased more than 50% compared to the prior week and was up 0.9% compared to the same week last year. Group ADR grew 4.7% year over year, well above the current rate of inflation. Weekday and shoulder periods produced ADR increases of 5% and 4.9%, respectively, while weekends increased 4%. The top 25 markets drove the group increase with occupancy up 0.6 percentage points, while group occupancy for the rest of the country declined 1 percentage point.
While group demand has been strong this year, year-to-date group demand remains 7% below what it was in 2019. The largest deficits are group nights on shoulder days and the weekend, which is more than 8% below 2019. Weekday has a deficit but it's half of what it is on the other day categories.
The Silver Lining of a Lackluster Week
Weekday performance in the top 25 U.S. hotel markets lifted the metrics in an otherwise lackluster week. This pattern is moderately concerning given that the week’s performance was more a reflection of business travel, and the next couple of months generally rely on more leisure travel, which was not reflected in other markets this week. One silver lining is the continued strong group performance, which is expected to hold for the next three weeks before declining sharply over the Fourth of July holiday week. Additionally, economy chain hotel performance for the past couple weeks has been “less bad.”
Global Hotel Performance Retreats
Global occupancy took a step back, falling by 0.7 percentage points. The decrease was widespread across the top countries. Occupancy in China fell 4 percentage points year over year with declines also seen in France and Italy. Even with the occupancy fall, global RevPAR was up 5.9% on solid ADR gains.
Among the top countries, the largest ADR increase was seen in Mexico, where rates grew 11.5%. Within the country, Mexico City had a good week as ADR climbed 21.5% year over year and occupancy grew 9 percentage points year over year.
Italy, which has seen strong performance for most of the year, saw RevPAR decrease by 5.4%. The decrease was driven by occupancy falling 2.7 percentage points, and that decline was seen across all the major regions and cities; Rome hotel occupancy fell 2.8 percentage points and Milan’s hotel occupancy dropped 5.2 percentage points. Performance was likely impacted by EU parliamentary elections, which took place over the weekend. Weekend occupancy in Italy fell by 6.3 percentage points year over year.
Germany led the key countries in hotel RevPAR growth, which was up 17.7% year over year. Major biennial fairs, the Berlin Air Show and LASYS in Stuttgart boosted the country’s overall performance.
China’s hotel RevPAR was down 8.4%. This is likely attributable to the calendar shift in the public Dragon Boat Festival holiday occurring one week later this year. Typically, travel patterns change around this holiday as they did last year when the holiday was held June 22-24. Occupancy fell week over week by 8.4 percentage points.
Globally, hotel performance remains strong, boosted by healthy ADR increases, which remind us of the strong ADR performance experienced in the U.S. last summer. If what happened in the U.S. is a good indicator — along with a strong summer schedule of sporting events such as the Olympics, Euro 2024, etc. and concerts headlined by Taylor Swift’s international tour — global hotel performance over the next couple months should remain solid.
Isaac Collazo is vice president of analytics at STR. Chris Klauda is senior director of market insights at STR. William Anns is a research analyst 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.