Inflation continues to drag on hotel performance in a season of positives amid challenge

The final stretch of 2024 featured "weird but good" hotel performance around the world, but inflationary drag on rates continues to cause concern.

On the latest episode of Tell Me More: A Hospitality Data Podcast, hosts Isaac Collazo and Jan Freitag shared highlights from November hotel performance and peeked at the "moving pieces" kicking off 2025.

Revenue per available room in the U.S. grew 2.5% in November, driven by occupancy, which STR's VP of Analytics Collazo said was a rare case in 2024.

He also highlighted a "reverse bifurcation" in the month, with midscale and economy hotels finally notching significant RevPAR gains — more than 5% — while upper-upscale and upper-midscale hotels only grew on average 2.6% RevPAR growth. Luxury hotels continued to lead the way, notching RevPAR gains of 5.3% in the month.

Still, inflation casts a cloud.

"In November, inflation was 2.7%, resulting in a 1.9% gap at average daily rate growth to the consumer price index, essentially meaning inflation-adjusted real ADR went backwards," Collazo said. "That's something we have to keep harping on, because it's important."

Hotel room demand in November was another highlight, increasing 2.2% in the month — the sixth gain in the past eight months, Collazo said.

But hotel supply also increased in November by 0.6%.

"Because we have supply increasing and then still had demand not reaching 2019 levels consistently, we're still about 3.3 percentage points behind 2019 in occupancy," he said.

Freitag, CoStar Group's national director of hospitality analytics, said that while group hotel RevPAR was down 5.1% for the month — likely because many avoided booking events in the U.S. around the election and Thanksgiving — "group is still a good success story."

He also raised the issue of stale rate growth, and what it might take to get sustained pricing power back.

"Is this the new normal and what does that imply?" Freitag asked. "Are we now in this later part of the cycle where ADR growth continues to stay anemic?"

"There are a lot of moving pieces ... but maybe I just have to get rid of this thought that ADR growth should outpace CPI, which is what we have said forever," Freitag said.

Also in this episode

Collazo digs more into November demand trends, pointing out that this year's November demand was the second-highest ever for November, only behind 2019.
Collazo shares new STR analysis on hotel conversion activity, showing that year to date through October, 1,103 hotels in the U.S. have gone through a conversion. Conversion activity over the past few years "continues to be below the 20-year average," he said. The largest sub-grouping was the 391 hotels that converted from brands to independent.
Freitag cited recent data from Tourism Economics that breaks down the number of non-U.S. citizens employment by sector using U.S. Bureau of Labor Statistics data. The data shows that about 15% of hotel and accommodations sector employees are not U.S. citizens, led by housekeepers. He shared the data in the context of the incoming Trump administration's deportation plan.