The week of July 21-27 marks the turning point of the summer season, with U.S. hotel occupancy falling after last week’s annual peak. While this seasonal decline was expected, it was greater than the decline seen last year and in 2019.
U.S. hotel occupancy decreased 1.5 percentage points from last week’s peak. This decline was greater than the week-over-week decline seen last year (-0.6 percentage points) and in 2019, when it fell 0.4 percentage points. Average daily rate decreased 0.9% week over week, resulting in revenue per available room falling 3%. Compared to last year, ADR rose 1.3%, resulting in a RevPAR gain of 0.9%. The top 25 U.S. hotel markets continued to produce stronger metrics compared to the rest of the country with year-over-year RevPAR up 1.4%, which was the result of 1.1% ADR growth and occupancy increasing 0.3 percentage points. RevPAR for the rest of the country increased just 0.5% year over year.
Last Week’s Tech Outage Lifted US Hotels at the Start of the Week
The global tech outage on July 19 helped lift U.S. hotel performance for the first two days of the week; however, each day that followed performance slowed, ending with the largest decline on Saturday. This pattern occurred across all chain scales and was particularly evident in the top 25 U.S. hotel markets, specifically Atlanta, Chicago, Denver, Detroit and Minneapolis. Not surprising, airport hotels, housing travelers affected by canceled flights due to the outage, also benefited.
On Sunday, July 21, U.S. hotels posted the largest RevPAR increase at 2.6%, followed by Monday rising 2.2%. Each subsequent day recorded weaker RevPAR, ending with Saturday down 1.5%. Airport hotels benefited the most with the year-over-year RevPAR progression from 9.9% growth on Sunday to 7.9% on Monday and then steadily declining through to Saturday RevPAR dropping 4.9%. The five markets mentioned above recorded double-digit RevPAR growth on Sunday and all but Minneapolis continuing double-digit RevPAR gains on Tuesday.
Upper Upscale Hotels Produced the Strongest Performance This Week and for the Past Four Weeks
Bifurcation across the chain scales continued with upper upscale hotel RevPAR up 2.2% followed by luxury up 1.1%. The next four chain scales steadily declined from 0.9% growth for the upscale segment to a 2.2% decline for economy hotels. ADR performance was stronger than occupancy across all chain scales except luxury, which was lifted by occupancy. All chain scales experienced positive year-over-year RevPAR on Sunday and Monday except economy hotels.
Over the past four weeks, chain-scale performance was similar to this week, albeit more muted. The upper-upscale hotel segment was the only chain scale producing positive RevPAR. The rest of the chain scales saw RevPAR declines ranging from down 0.1% to down 2.1% in order from luxury to economy.
Strong Group Demand Continued Across the Top 25 Markets and the Rest of the US
The bright spot of the week continued to be strong group demand performance, which saw increased demand and rate across both the top 25 U.S. hotel markets and the rest of the country.
Group demand in luxury and upscale hotels has increased in 22 of the past 28 weeks this year, producing an average increase of 4.4% year over year. This week’s group demand increased 9.9% and ADR increased 4.9%. Both the top 25 markets and all other markets supported this increase with group demand and ADR in the top 25 markets up 11.1% and 5.4%, respectively, while all other markets posted group demand gains of 8.7% with ADR up 4.2%. Eight of the top 25 markets experienced demand increases of over 20% including Atlanta, Las Vegas, Los Angeles, Miami, New Orleans, Philadelphia, San Diego and San Francisco.
Transient performance across luxury and upper-upscale hotels softened year over year with demand down 1.2% and ADR flat at just 0.2% growth. Over the past 28 weeks this year, transient demand has increased an average of 2.3% with 22 weeks in positive territory.
Looking Ahead
It would be fun to say the U.S. industry stuck the landing this week with the start of the Olympics in Paris, but realistically it was more of a soft landing with economic pressures affecting the pocketbooks of some travelers, changing travel patterns and competition from other lodging sectors reshaping the industry. August will continue to soften as the school year begins across the U.S. and family travel ends. The healthy group performance seen this summer is a positive indication that September should be strong as fall conferences and events ramp up.
Gold Medal Hotel Performance in France
Global hotel RevPAR reached a year-to-date high of $112, up 9.4% year over year, driven almost exclusively by ADR – which rose 8.6% year over year – while occupancy increased 0.5 percentage points, reaching a new yearly high at 73.7%.
During the week of the Olympics’ opening ceremony and the first full day of the games, France’s hotels experienced a notable increase in RevPAR, up 52% year over year, driven primarily by ADR, which rose 50.7% year over year. In Paris, occupancy for the week decreased slightly by 5.7 percentage points year over year. However, ADR in the capital surged by 90.8% year over year. This positive impact extended to the surrounding Île-de-France region, which saw ADR gains of 83.4% year over year. On the Saturday night of the opening ceremony, Paris ADR increased by 146% year over year with absolute ADR skyrocketing to $951. Paris hotel occupancy equally benefited, rising 15.8 percentage points year over year to 87.5%.
A similar pattern was seen in London in 2012 during the first week of the games. There, hotel occupancy fell 11.3 percentage points while ADR increased by 33% year over year. On the night of the opening ceremony in 2012, London hotel ADR increased 83% year over year, while occupancy remained almost flat, down 0.3 percentage points year over year to 85%.
Over the next couple weeks, the global hotel industry is expected to remain strong and then slow, similar to the U.S., as schools start back up in September.
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.