Hotel performance in the U.S. took a sharp drop following the Independence Day holiday, but as vacations wrap up and the new school year approaches, signs point to revenue per available room gains again.
The impact of the July 4 holiday falling on a Thursday reverberated into the following week. Hotel performance declined more than expected in the week ending July 13, with the greatest decrease happening at the beginning of the week — Sunday through Tuesday — and the greatest impact occurring in the top 25 markets.
It’s a similar pattern to what U.S. hoteliers saw in 2019, which followed the same day-of-week calendar, although the decline this year was much more severe than it was in 2019. All chain scales were affected, indicating that this softening was endemic across the industry.
Increasingly, the growth in alternative accommodations as a leisure hotel alternative is having an impact on demand and is compounded by strong outbound international travel.
Sharpest Declines Sunday Through Tuesday
Falling occupancy drove the 5.2% decline in revenue per available room. Compared to last year, overall occupancy decreased 3.2 percentage points, while average daily rate dropped 1.5%. The beginning of the week (Sunday through Tuesday) saw the largest decrease, with RevPAR down 8.1% year over year, the result of occupancy down 4.1 percentage points and ADR decreasing 2.8%. In 2019, RevPAR dropped 2.7% for the week and 5.1% over the first three days.
Across the top 25 markets, RevPAR declined 7.2% year over year, while at the beginning of the week, RevPAR dropped 12.2%. The rest of the country saw RevPAR drop 3.7% for the week and 6.2% for the first three days. In 2019, top 25 market RevPAR was down 4.3% year over year, with Sunday-Tuesday down 7.9%. A similar pattern of greater declines in the beginning of the week occurred outside the top 25 markets.
No Chain Scale Immune
All chain scales recorded RevPAR declines ranging from a 9.3% drop in luxury to a 2.9% drop in midscale. The top three chain scales — luxury, upper upscale and upscale — saw occupancy drop by more than 3 percentage points followed, in improving order, by the next three.
The largest ADR and RevPAR declines were in luxury, upper-upscale and economy hotels. The middle three — upscale, upper midscale and midscale — experienced ADR declines of less than 1%.
Group Demand Fell Again
Luxury and upscale hotel group demand decreased 15.7% year over year. A similar decrease occurred in 2019, but not nearly as severe (dropping 4.1%). The first three days of the week saw the largest year over year decline (down 27.1%) with each subsequent day becoming less negative.
This was the second consecutive week with falling group demand. It should be noted that the same outcome happened last year, but it was much less severe. Group ADR was one bright spot — up 2.3% year over year.
Most But Not All Markets Suffered
Bucking the aggregate trend of the top 25 markets, Houston, New Orleans, Oahu and Minneapolis posted double-digit RevPAR gains. Houston was driven by the outcome of Hurricane Beryl, while the other three markets were led by events and conferences.
The first three days of the week were the biggest drag for all markets, with 20 of the top 25 markets posting negative RevPAR in the three days ending Tuesday.
Travel Headwinds Persist
The sharpness of this week’s RevPAR decrease was a surprise and serves to highlight the challenges the industry faces as its recovery continues. Along with changing travel patterns, the industry is facing headwinds from alternative accommodations and cruise travel, along with an imbalance in outbound and inbound travel.
That said, RevPAR should achieve positive growth in the week ending July 20, as business and group travel returns. In addition, weekly occupancy is expected to reach its peak in the next several weeks followed by a slowdown as the school year begins. One in four K-12 students will be back in class in the first full week of August, according to STR's 2024-2025 School Break Report.
Global RevPAR On a Roll
Global occupancy (excluding the U.S.) fell for a second consecutive week (down 1 percentage point year over year), but global RevPAR increased 2.6%, reaching $105. This marks the fifth straight week that RevPAR has remained above $100. This growth was driven by a 4.2% year over year increase in ADR, despite the occupancy decline.
Among the largest global markets, Indonesia led with a 14.8% RevPAR gain driven by a 12.6% ADR increase. Leisure and tourism destinations saw the largest growth, including Bali, where ADR grew 16.5%, while Kalimantan — the Indonesian part of Borneo — saw a 10.5% ADR gain.
Germany, which hosted the two semifinal Euro matches last week, posted RevPAR growth of 10.5%. The matches, held in Munich and Dortmund, significantly boosted performance in these cities. Dortmund saw an occupancy gain of 17.1 percentage points; however, across the whole week, Munich experienced a year over year occupancy decline of 5.8 percentage points. Both cities recorded positive ADR gains, with Munich at 33.4% and Dortmund at 167.1%.
Looking ahead, the remainder of the world will continue to see slowing occupancy and strong ADR, benefiting from the strength of international travel.
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.