First-quarter U.S. hotel performance can be a volatile ride, but analysts say it’s important to remember all the factors at play that create waves in the first place.
In the latest episode of "Tell Me More: A Hospitality Data Podcast,” CoStar National Director of Hospitality Analytics Jan Freitag and STR Vice President of Analytics Isaac Collazo unpack first-quarter and March hotel performance, along with all the factors contributing to the 2.2% year-over-year drop in revenue per available room from March 2023 to March 2024.
“There’s a real reason for this,” Collazo said. “March this year had Easter on the last week, and also had a fifth Sunday — that Easter Sunday. So that really impacted performance. Don’t think of this as an indicator of things to come.”
Volatility is created when big RevPAR swings happen, and Collazo cited Las Vegas as an example of volatile average-daily-rate swings as the city adjusted to major events.
“Something like the Super Bowl creates a lot of volatility, with very high prices, but then the following week was low,” he said. “The up-and-down almost looks like a heart monitor when you graph it out, but it’s the heart monitor of our hospitality health. That’s just the way it is.”
“And we are very much alive, just to be clear,” Freitag added with a laugh.
The two analysts said March data is not an indicator of doom and gloom to come for the U.S. hotel business. Rather, it’s underlining the notion of bifurcation, that upper tiers are doing well while lower-tier scales and classes are losing some demand, all tied back to higher costs of living in the present economic environment.
Collazo pointed out that higher-end segments saw RevPAR gains in the first quarter — notably, upper-upscale hotels had a 3% RevPAR jump compared to last year — while the lower half of chain-scale segments saw “real declines.”
Freitag illustrated that bifurcation by citing class data, which is similar to segment data but includes independent hotels unaffiliated with chains.
“Luxury class demand for the quarter was up 4.6% and economy class demand was down 6.1%,” he said. “Something we will have to continue to remind our readers and listeners about is … for this year, you should always look at how the upper end is doing and how the lower end is doing, because the lower end has so many rooms, that it sort of skews the data down.”
More From This Episode
Other topics in the episode include:
- Freitag dissects New York City’s hotel pipeline: New York City has the largest construction pipeline among the nation’s top 25 markets, but relatively few rooms in the planning stages, thanks to tough city regulations in play. That plus other factors underscore constrained supply and possible pricing power.
- Collazo posits a different way to look at first-quarter performance and talks about how the Coachella Valley Music and Arts Festival is a perfect example to illustrate how many people are choosing selective travel over no-holds-barred revenge travel.
- Freitag and Collazo discuss the psychological effect hotel transaction activity can have on the larger industry: “It seems to me that people have just adjusted to the fact that the interest rate is what it is” and are going ahead with the deal, Freitag said.
- In each episode, speakers share a fun metaphor that illustrates the hotel industry at the moment For March, Freitag compares the industry to a Kinder Egg, the German chocolate egg with a toy hidden inside. Collazo goes for music references, wondering whether this summer will be like Lana Del Rey’s “Summertime Sadness” or the Bleachers’ “Rollercoaster.”
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