The second week of September was a bit disappointing for hoteliers in the U.S.
The week ending Sept. 14 was sluggish for the U.S. hotel industry as revenue per available room decreased for a second consecutive week – this time 1.4% year over year. Occupancy was down 1.1 percentage points with the largest declines seen at the start of the week. Average daily rate was almost flat year over year (+0.2%) and unchanged from the previous week. RevPAR comparisons turned positive during the weekend but at less than 1% growth. Rosh Hashana was on Saturday during last year’s comparable week, so we expected stronger hotel performance results this year.
All chain scales reported hotel RevPAR declines as did the top 25 U.S. hotel markets (-1.7%), which saw nearly equal decreases in occupancy and ADR. The top 25 markets were significantly affected 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, calendar shifts of holidays and events affect hotel performance. Not only did San Francisco impact the top 25 U.S. hotel markets, 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 1.1 percentage points while ADR rose 1.2%. San Francisco’s RevPAR declined 37.2%, all due to ADR’s decline of 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 down 0.5% in luxury to down 3.7% in economy hotels. Occupancy decreased in all chain scales except luxury, which rose 2.4 percentage points. The occupancy gain was driven by hotels in Maui, Fort Lauderdale, and San Diego, where occupancy was up by more than 13 percentage points. While luxury occupancy increased, ADR in the segment declined 3.7%, the largest decrease of any chain scale, with nearly half of the decrease coming from San Francisco.
Upper-upscale hotels showed the smallest occupancy decline, down 0.3 percentage points, resulting in a 0.2% RevPAR decrease. Upscale followed with an occupancy decrease of 1.3 percentage points, resulting in a 1.1% decline in RevPAR. Occupancy declines across the bottom three chains scales ranged from 1.4 percentage points to 1.8 percentage points with RevPAR decreases between 2% 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.
US 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 at 2.2 million rooms sold. 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, the next two weeks are expected to show strong group demand followed by a slight decrease in the first week of October – Rosh Hashana occurs on Thursday, Oct. 3. We believe the holiday 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.
Looking ahead
The week’s soft performance was somewhat unexpected, although explainable to a degree due to convention calendar shifts. The rest of September should see better results buoyed by Dreamforce and other conferences and events, but the month will be affected by its composition, which includes one less weekend than a year ago. Early October will be soft as Rosh Hashana takes place on a Thursday, affecting some groups and meetings.
Strong global performance continues into the September
Global hotel RevPAR excluding the U.S. rose 5.6% on a 7.8% ADR gain. For the 13th time this year, RevPAR surpassed the $100 threshold – $101 to be exact. Occupancy reached 70.2%, 1.5 percentage points below what it was in the same week of 2019.
Mexico, Spain and Indonesia each saw RevPAR gains in excess of 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 a 20.7% ADR jump. In all, eight of the 12 markets saw double-digit RevPAR growth, mostly via ADR.
In Spain, eight of the nine markets posted hotel 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’s hotels 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 hotel RevPAR in China fell 6.3%, due entirely to a 4.4-percentage-point drop in occupancy to 65.4%. Each the country’s 10 largest markets experienced occupancy declines with Chengdu seeing the largest drop at 10.7 percentage points and Guangdong the smallest at 1.5 percentage points. After 29 weeks of consecutive decreases, hotel ADR was flat and was mixed across Chinese markets ranging from a 13.9% gain in Shenzhen to an 8.3% decrease in Hangzhou.
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.