Despite some performance dips along the way, summer 2024 U.S. hotel room demand ended up in the top three since 2000, notching 390 million room nights between Memorial Day and Labor Day.
Yes, that date range technically qualifies as unofficial summer, said STR Vice President of Analytics Isaac Collazo in the latest episode of Tell Me More: A Hospitality Data Podcast. But the 101 days between the Friday of Memorial Day weekend and the Sunday of Labor Day weekend are a good proxy for general seasonal demand in the U.S.
In that time frame, 2019 represented peak demand with 401 million room nights, followed by 2018 with 397 million room nights.
The difference between 2019 and 2024 is that in 2019, many more people traveled to the States from other countries, a dynamic that's simply not fully normalized, Collazo said.
"Plus, I do believe that a larger portion of room demand is going to short-term rentals," he added.
August hotel performance benefited those summer numbers, contributing revenue per available room up 3.9% — the second-highest gain of the year behind May — and an additional weekend.
Collazo's co-host Jan Freitag, CoStar Group's national director of hospitality analytics, kept the optimism going with some early impressions of the recent Federal Reserve interest rate cut and its impact on hotel transactions.
"An interest-rate cut is welcome news to U.S. hoteliers, and why is that?" he asked. "There are two topics: One is asset transactions and the other is the pipeline."
This initial move will spur confidence and comfort, Freitag said, calling it "pencils up" for deal underwriting.
"On the luxury side, we've never seen a [deals] slowdown ... but it's in limited-service-type properties where we expect a lot more activity in the pipeline," he said, though that will take time.
U.S. hotel supply growth is 0.5% year to date according to CoStar data, and the number of rooms in construction has hovered in the 150,000 to 160,000 range for nearly three years, he said. But rooms in the planning phase — which include hotel rooms involved in deals that are confirmed and under contract — were up 40% from August 2023.
"As interest rates come down, more people are going back to the bank and saying, 'Hey, can you get me construction financing for my project?'" Freitag said.
Also in this episode
- Collazo breaks down U.S. hotel performance in August, showing the strength of adding an additional weekend to the month, why average daily rate drove revenue per available room in the month, and how both top 25 cities and cities outside the top 25 both had similar ADR growth, thanks to continued business and group travel demand to major cities.
- Collazo shares that for the first time since March 2023, all chain scales saw RevPAR growth, including the economy segment.
- Freitag and Collazo dive more into the supply growth that may result from interest-rate cuts, and when we might see it come online.
- Freitag looks at the explosive growth of hotels around the world charging $1,000 or more per night.
Referenced in this episode
- Wave of large hotel deals focuses on 'irreplaceable' properties, by Bryan Wroten. Published in Hotel News Now on Sept. 13.
- Hotel News Now's monthly podcast exploring Asia-Pacific hotel performance. Latest episode here; all HNN podcasts here.