U.S. hotels had a solid week, and August has been stronger than July.
U.S. hotel revenue per available room soared in the week ending Aug. 24, up 4.5% year over year, which was the highest increase of the past eight weeks. The top 25 U.S. hotel markets again led the industry – especially on weekdays from Monday to Wednesday – and were supplemented by growth elsewhere, especially transient weekday demand in non-top 25 markets.
Room demand has been trending upwards in the U.S. hotel industry for the past four weeks. The upper-tier chain scales of luxury and upper upscale still lead the way, but with added contributions from the middle of the market – upscale and upper midscale – and less decrease in the lower tier’s midscale and economy segments. Gains in average daily rate generally met or exceeded the current level of inflation. With conference and convention season around the corner, the next couple months are expected to follow similar patterns.
Highest RevPAR Gain in Eight Weeks
U.S. hotel RevPAR increased by 4.5% and included contributions from both ADR – which rose 2.7% – and occupancy, which increased by 1.1 percentage points. This was the highest RevPAR gain since the week ending June 29, when RevPAR rose 6.9%. More importantly, RevPAR comparisons have been positive for the past six weeks. Both the top 25 markets and the remaining markets saw solid growth with weekdays providing the largest RevPAR lift (+6.4%), more a result of a 3.7% ADR gain than occupancy’s lift of 1.7 percentage points. RevPAR on the shoulder days of Sunday and Thursday increased 5.1% with ADR up 3% while occupancy rose 1.2 percentage points.
Weekend days Friday and Saturday was slower but with positive comparisons as RevPAR was up 1.5%. That was the first weekend gain in five weeks, mostly due to ADR increasing 1.2%. Overall, ADR was at or above the rate of inflation for all day categories except weekends.
All Chain Scales Increased RevPAR for Only the Third Time in the Last Year-Plus
While bifurcation continued, year-over-year RevPAR comparisons were positive for all hotel chain scales for the first time since April and only the third time since May 2023. Luxury hotels produced the greatest RevPAR increase (+8.9%) with a occupancy up 3.4 percentage points and ADR up 3.3%. The remaining five chain scales improved RevPAR in descending order from upper upscale (+5%) to economy hotels (+2.5%) with ADR increasing at a rate greater than or equal to occupancy.
Chicago Hotels Elevated by the Democratic National Convention
Chicago, which hosted the Democratic National Convention, posted hotel RevPAR growth of 51.1%. All Chicago submarkets increased RevPAR ranging from a 74.7% jump in the Chicago central business district to a 5.5% increase in Lake County. Hotels in submarkets closer to the DNC saw the greatest lift, which included Chicago O’Hare Airport (+54.5%), Chicago North (+26.2%) and Chicago Southwest (+22.2%). Last month, the Republican National Convention in Milwaukee produced RevPAR gains of 230.4% in the central business district and 178% across the entire market. It is important to note, however, that Chicago comprises six times more hotel rooms than Milwaukee.
Houston experienced another record week with hotel RevPAR increasing 45.7%. Submarkets outside the central business district were the primary drivers due to a variety of factors including lingering displacement due to Hurricane Beryl, oil and gas turnaround activity, and the end of summer leisure travel and events.
New Orleans hosted the 105th annual American Legion National Convention and its hotels saw robust performance with RevPAR up 29.1%. That placed “The Big Easy” in the top five of all markets in RevPAR growth for a seventh time in the past eight weeks.
Healthy Group Performance Propelled by Weekdays
Group demand in luxury and upscale hotels was up for the sixth week in a row, increasing 3.7% along with ADR up 7.6%. Weekdays have been the primary demand driver for the past four weeks with weekday group demand up 6.5% for the most recent period. Demand on shoulder days was also strong, up 4.4%, while weekends declined 2.7%. ADR increased for both shoulder days (+10.2%) and weekdays (+8.8%) with weekends lower at 3.4% growth. The top 25 U.S. hotel markets were entirely responsible for the 9.5% gain in group demand while ADR increased 8.3%. Chicago and New Orleans — the top two markets – recorded double-digit hotel group occupancy growth.
Transient performance across luxury and upper-upscale hotels increased for the first time in three weeks with demand up 2.7% and ADR up 1.6%. Weekdays were the strongest with demand up 3% and ADR up 2.9%. Weekends produced the weakest performance while still positive. Houston and San Diego saw the greatest increase in transient demand across the top 25 markets. Transient demand across the rest of the U.S. increased 4.5%.
Looking Ahead
It’s likely that in the final week of August, U.S. hotel performance will be flat to down, based on 2019 performance, where the year looked a lot like this year.
However, early projections show that August will post solid RevPAR growth due in part to the inclusion of a fifth weekend versus a year ago. More importantly, the recent strengthening in weekdays with the start of schools in many parts of the country serves as a positive indication that business travel is recovering and will help stabilize performance in the coming weeks and months.
Hotel Performance Highlights Around the Globe
Global hotel performance improved for the 12th consecutive week, with RevPAR increasing 5.3%. This uplift was largely driven by ADR, which rose 4.4%, while occupancy increased modestly by 0.6 percentage points. And even though occupancy grew slightly to a level of 72.6%, that level was the 10th highest of the past three years. Just three weeks ago, global hotel occupancy excluding the U.S. reached 74.3%, its highest level since 2019.
Mexico saw a significant hotel RevPAR gain of 7.2%, with the second-highest ADR increase of the top countries at 13%, continuing a double-digit growth trend since late July. However, occupancy has been softening, dipping to 59.4% for the most recent week, down 3.2 percentage points. Within Mexico, all markets posted ADR gains, notably the Mexican Caribbean at 26.4% and the Pacific South market at 16.1%. Hotel occupancy improved in three of 12 markets, with increases ranging from 0.4 percentage points in the Pacific Central market to 1.4 percentage points in Mexico Central/Bajo.
RevPAR continued to fall in China, down 4%, as ADR decreased 6.3%. However, occupancy increased 1.9 percentage points, rising for the first time in nine weeks. RevPAR has fallen for nine consecutive weeks and in 26 of the past 34 weeks. All indications are that China’s hotels will continue to see soft performance.
In London, the last two nights of Taylor Swift’s European tour on Monday, Aug. 19, and Tuesday, Aug. 20, produced a significant performance boost with hotel occupancy up 9.8 percentage points and ADR up 15.1%. Across all five tour nights, hotel occupancy grew 8.1 percentage points and ADR advanced 18.4%. For the entire week, London RevPAR grew 11.9% on a 5.8% rise in ADR and occupancy rose 4.6 percentage points. Occupancy reached 84% for the week, down from the prior week (86.8%) but above 80% in 16 of the past 19 weeks.
Global hotel performance will remain healthy while slowing as summer comes to an end in the Northern Hemisphere.
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.