The fireworks have faded and now U.S. hoteliers hope summer travel demand is ready to blast off.
Not surprisingly, weekly U.S. hotel performance deviated from prior weeks due to the Fourth of July holiday. In the week ending July 6, revenue per available room fell 0.4% after a 6.9% gain in the prior week.
Significant hotel RevPAR decreases exceeding 11% were seen on Sunday and Monday, which were due to the shift in the holiday. Last year, the Fourth of July fell on a Tuesday and resulted in tough comparisons early in the week.
On the flip side, easy comparisons were seen on Wednesday though Friday as U.S. hotel RevPAR increased by more than 8% with the measure growing by 19% on the actual holiday. Weekly occupancy fell 0.5 percentage points and average daily rate grew slightly, up 0.5%.
There have only been four July Fourth holidays on a Thursday since daily data hotel performance benchmarking began in 2000: 2002, 2013, 2019, 2024. This year’s room demand total was the second highest of the four behind 2019 but occupancy ranked third and was also behind 2019 – 61.3% vs. 65.2%. ADR growth was the lowest of the four prior occurrences with all hotel classes seeing flat to negative ADR except upper upscale – which rose 0.8% – and economy, up 0.2%.
As compared to the past 25 years, this week’s hotel room demand was the seventh highest with the highest achieved in 2021, however, occupancy ranked 20th. The highest hotel occupancy for the July Fourth week was seen in 2015 (68.2%) when the holiday fell on a Saturday. This week’s negative RevPAR is not unheard of as it was down 1.2% last year and down on six other holiday weeks – excluding 2020 – since 2000. However, this was the first time U.S. hotel RevPAR was down as compared to the previous three when the fourth fell on a Thursday.
Top 25 Markets Still Driving Industry RevPAR Growth
In the top 25 U.S. hotel markets, RevPAR increased 1.8% year over year led by ADR growth of 1% and occupancy rising by half a point. In the remaining markets, RevPAR decreased by 1.8%, entirely due to falling occupancy — down 1.1 percentage points — as ADR was flat.
Eleven of the top 25 markets saw weekly hotel RevPAR increase by more than 4% year over year, with six seeing double-digit growth. New Orleans saw the largest increase at 56.1%, followed by Seattle, Houston, Philadelphia, Denver, and Oahu. Four of these markets — New Orleans, Seattle, Philadelphia, and Oahu — benefited from strong group performance during a traditionally slow week for groups.
All but the Top Hotel Chain Scales Posted Declines This Week
Room demand by chain scale remains bifurcated. The luxury segment saw its highest room demand of any previous July Fourth week while the economy hotel segment posted its lowest. Even though demand was at a record high for the holiday week, luxury hotel occupancy was still only the 16th best of the past 25 years behind the record set in 2015 (60.2% vs 69.5%). Room demand for upscale and upper-midscale hotels was the fourth highest for the holiday week behind the level seen in 2021. For upper upscale, demand was the third highest behind 2019.
Group Demand Dropped After a Strong Showing in Between Juneteenth and July Fourth
Luxury and upscale hotel group demand decreased 10.3% compared to the same week last year following an exceptional increase the previous week of 19.6% year over year. The strong group seen in the previous week was the result of being bookended by the Juneteenth and July Fourth holidays.
Group demand is expected to ramp back up in the next two weeks before the August slowdown followed by a strong fall, which is the most popular time of year for conference and events. Hotel group ADR continued to strengthen, up 3.2% this week and 7% in the previous one.
Reasons for Optimism the Rest of the Summer
The next week of U.S. hotel performance data should show post-July Fourth recovery of business and group demand along with continued strength from leisure. TSA airport screenings continued to break records with Sunday, July 7, reporting the highest number of daily airport screenings.
Numerous research companies are reporting strong summer travel. According to Future Partners, 73.5% of American travelers said they were likely to take at least one trip between June and August. Longwoods International reported that of American travelers, 94% of them plan to travel in the next six months, the highest percentage in 2024.
But what’s concerning is that the U.S. hotel industry hasn’t seen the same level of growth as the air travel and surveys suggest. U.S. hotels are facing headwinds created by the continued growth of short-term rentals along with the outbound/inbound travel imbalance.
We expect occupancy to reach its yearly peak over the next two weeks followed by seasonal slowing as the school year begins, starting in the southern U.S. September and October, the most popular months for conventions and conferences, will see strength from group demand followed by November and then December, the slowest month of the year.
Global ADR Showed Positive Year-Over-Year Growth
Global hotel occupancy was 69.8% during the week ending July 6, down 1.6 percentage points with many of the largest countries — based on supply — recording declines. ADR, however, rose 2%, which was insufficient to offset the occupancy decrease and resulted in a 0.4% RevPAR decline.
With the ongoing Euro 2024 Tournament, Germany led in results among the largest hotel markets with a 14.5% RevPAR gain. The gain was driven completely by ADR, which jumped 15.3% while occupancy was down 0.5 percentage points. Dusseldorf, which hosted two of the tournament’s knockout games, saw the largest gains with RevPAR up 90.5% via ADR (58.4%) and occupancy growth.
At the other end of the hotel performance spectrum, France, with just under three weeks until the Olympics, experienced a RevPAR decline of 16.8%, driven by decreases in both ADR (-11%) and occupancy (-5 percentage points) due to displacement. This is particularly evident in Paris, where last week's hotel occupancy fell by 10.5 percentage points to 72%, ADR dropped by 25%, and RevPAR decreased by 34.5%. Looking ahead, significant hotel performance gains are expected during the Olympics with occupancy on the books as of July 8 at 81%, 28% higher than at the same time last year.
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.