Weekday performance saved an otherwise lackluster week across the U.S. hotel industry.
Hotel occupancy was essentially flat for the week of Aug. 11-17 with weekdays — Monday through Wednesday — up and the rest of the week down. Hotel average daily rate continued to rise, pushing gains in revenue per available room for the fifth straight week, albeit at a rate below the level of inflation.
Five seemed to be the magic number as RevPAR in the top 25 markets also rose for the fifth consecutive week, lifted by weekdays over each of the past five weeks. Five of the six chain scales — all but economy hotels — increased weekday RevPAR, and group demand increased for the fifth week in a row.
Weekday Performance Countered a Slow Weekend
U.S. hotel RevPAR increased a modest 0.9% year over year due to ADR increasing 1%. Hotel occupancy dipped a minuscule 0.1 percentage points. RevPAR in the top 25 U.S. hotel markets rose 2.1% and counteracted the nearly flat RevPAR (+0.1%) experienced across the rest of the country. Hotel occupancy in the top 25 markets rose 0.8% and ADR increased 0.9%. Weekday performance in the top 25 was the real winner, with a RevPAR gain of 3.8%. Markets outside the top 25 also posted weekday RevPAR gains of 1.2%. Weekend RevPAR on Friday and Saturday was down both in the top 25 markets (-0.4%) and the rest of the U.S. (-1.2%).
Weekdays Lifted RevPAR Across All Chain Scales Except Economy
Bifurcation continued across the U.S. hotel industry chain scales with RevPAR rising in upper upscale by 2.8% and in luxury hotels by 1.2%. The next two chain scales maintained positive RevPAR comparisons, just barely, while midscale and economy declined. Weekday RevPAR improved across the top five chain scales following the same pattern seen across the chain scales overall. ADR drove weekday gains, which is an indication of decent pricing power as business travel continued to strengthen.
Houston’s Growth Streak Holds for the Sixth Week in a Row
Four of the top 25 U.S. hotel markets reported double-digit RevPAR, with Houston earning top honors for the sixth consecutive week, up 53.8%. Minneapolis hotels were a distant yet robust second with 22.7% RevPAR growth, strengthened by a packed concert calendar. Next was Chicago, up 18.7%, as hotels were preparing for the Democratic National Convention. Finally, New Orleans’ hotel market placed in the top five for RevPAR growth for a sixth time in the past seven weeks.
Healthy Group Performance Propelled by Weekdays
Group demand in luxury and upscale hotels was up for the fifth week in a row. In the most recent week, group demand increased 8.7% and ADR advanced 4%. Weekdays were the primary driver where group demand increased 11.8%. Shoulder and weekends were also strong, up 9.1% and 3.1%, respectively. ADR increases were more balanced with weekend ADR (+4.4%) followed by weekdays up 4% and shoulder days up 3.7%.
The top 25 U.S. hotel markets were responsible for the 16.8% gain in group demand while ADR increased 4.5%. Across the rest of the country, group demand was essentially unchanged while ADR increased 3.6%. Twenty of the top 25 markets saw group demand growth with Anaheim (Orange County), San Diego, Orlando and Dallas all increasing by more than five percentage points in group occupancy.
Transient performance across luxury and upper-upscale hotels was soft for the second consecutive week with demand down 0.5% and ADR up 0.5%. Weekdays helped lift ADR 1.7% while weekday demand was down 0.4%.
Looking Ahead
We expect U.S. hotel occupancy to continue a seasonal slowdown until after Labor Day week. This summer’s healthy group performance will wane, as is typical this time of year, before ramping back up in September.
The strengthening of weekday hotel performance serves as a positive indication that business travel will continue to be counterbalanced by soft weekend performance, which is expected to persist in the coming months. Calendar shifts in the Jewish observance of Rosh Hashana and Yom Kippur will affect September and October, and the week of the U.S. election on Nov. 5 is likely to see reduced demand as evidenced by future occupancy on the books recorded by STR’s Forward STAR.
The good news for Miami, New Orleans and Indianapolis along with Toronto and Vancouver is the return of Taylor Swift’s Eras Tour this year.
Paris Maintained Momentum; London Welcomed Taylor Swift
Global hotel performance continued to advance with RevPAR up 6.6%, driven primarily by a 5.8% rise in ADR, while occupancy rose 0.6 percentage points to 73.1%. This marks a slight dip from the previous week's yearly high of 74%.
Indonesia led the largest global hotel markets in RevPAR growth with a 23.2% increase. The strong performance was driven by gains in 11 out of its 12 markets with Southern Sumatra and Kalimantan seeing the most significant growth at 52.3% and 49.4%, respectively. Ongoing high demand from international travelers, as well as robust corporate and government domestic demand, continued to fuel this positive trend across the country.
Occupancy and ADR continued to fall in China with RevPAR down 9.8% in the week. RevPAR has fallen in the past eight consecutive weeks and in 25 of the past 33 weeks. RevPAR was down this week in 33 of China’s 43 markets with the seven largest markets – Beijing, Guangdong, Guangzhou, Hangzhou, Jiangsu, Shandong, and Shanghai – seeing RevPAR losses of more than 11%.
Paris occupancy increased 10.1 percentage points to 77.5% on Sunday of the Olympics closing ceremony with ADR soaring, up 116%. A drill-down across all days of the Olympics can be viewed here. Over the entire week, Paris saw occupancy decline 7.8 percentage points, offset by a 27.2% gain in ADR resulting in positive RevPAR comparison, up 12.3%. Outside of Paris, all other markets saw occupancy increases, with the largest gains in the southeastern regions: Auvergne-Rhone-Alpes up 10.3 percentage points to 72.8%, and Bourgogne-Franche-Comté up 16.7 percentage points to 81%. The biggest ADR uplift (+46.6%) occurred in the surrounding Île-de-France region.
In the U.K., the week’s results included three of the five nights of Taylor Swift’s Eras Tour in London. During the concert nights from Thursday to Saturday, London hotel ADR increased 21% and occupancy rose 7 percentage points. In contrast, for the rest of the week, occupancy was up only 2 percentage points with ADR rising 6%.
Global performance will slow as summer comes to an end in the northern hemisphere. London will get a final boost from Taylor Swift’s last two shows. All indications are that China will continue to see soft performance.
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.