Summer is almost here in the U.S., and a favorable calendar shift in early May might appear to hoteliers that the party’s already started.
U.S. hotel revenue per available room grew 2.8% year over year for the week ending May 18. Once again, group and midweek demand across the U.S. hotel industry’s upper chain scales drove performance. The increase in RevPAR was driven almost entirely by average daily rate, which rose 2.6%. Occupancy was up 0.1 percentage points at 67.4%, which was the highest weekly occupancy of 2024 but still 3 percentage points below the 2019 comparable.
Across all markets in the U.S., Louisville took top honors with a year-over-year RevPAR increase of 80.7%, supercharged by the 2024 PGA Championship. Along with the Kentucky Derby earlier in the month, weekends were busy for Louisville hoteliers. Next year, the PGA Championship moves to Charlotte. North Carolina also hosts the next golf major, the U.S. Open, at Pinehurst in June.
We estimate roughly half of the most recent week’s hotel RevPAR growth came from upper-upscale hotels, where RevPAR increased 6% year over year. Other contributors included luxury (+4.5%), upscale (+3.6%) and upper midscale (+1.6%). ADR drove the growth in these chains, except in luxury hotels, which saw ADR retreat for the 16th time in the 20 weeks this year and 43rd time in the past 52 weeks overall. New openings, affiliation changes, mix changes, increased outbound travel, etc. are driving down ADR.
In the lower tiers, RevPAR was up 0.8% in midscale hotels and down 2.8% in the economy segment on nearly equal decreases in occupancy and ADR. Over the past two weeks, occupancy in economy chains has fallen an average of 0.5 percentage points versus 1.5 percentage points seen in all other weeks of the year. While it’s too early to claim that the worst is behind us, the easing declines are positive news.
For those highlighting May month-to-date RevPAR growth of 8.7%, don’t expect that growth to last. In the first 18 days of this month, an extra Friday and Saturday are included, whereas a year ago the same 18 days had an extra Monday and Tuesday. Looking at the month on a day-matched basis – Wednesday, May 1, 2024, compared to Wednesday, May 3, 2023, and so on – month-to-date RevPAR is up 4%, driven by the results for the week ending May 11, 2024, when RevPAR increased 6.8%.
We expect RevPAR growth to fall more by the time the month ends, but the overall comparison for May should remain positive and potentially be the best of the year so far. Full-month results will benefit from the inclusion of an extra Friday.
Weekdays Boost Top 25 US Hotel Markets and Beyond
Weekday performance was strong across the nation, increasing 5.2% in the top 25 markets and 3.5% elsewhere. Weekends produced RevPAR improvement across the top 25 markets – which rose 3.5% year over year – while it was flat in the remainder of the country. The shoulder days of Sunday and Thursday increased for both areas at about half the rate as the weekday period. And, for the first time this year, RevPAR was flat to up in all day categories among both the top 25 and all other markets.
Weekday RevPAR advanced by 8.1% in upper-upscale chains followed by gain of 5.5% in upscale and 4.2% in luxury. Luxury and upper-upscale hotels also saw solid weekend RevPAR growth at 5.6% and 4%, respectively. Upper-upscale also saw good weekday and weekend ADR gains, topping 3%.
Markets Outside the Top 25 Take the Lead in Group Demand
After increasing by more than 10% in the previous week, U.S. hotel group demand continued to advance at a healthy pace, up 8.5% among luxury and upper-upscale hotels.
Not surprising, weekdays showed the largest increase at 10.3% followed by shoulder days at 9.7% growth and the weekend up 4.6%. Markets outside the top 25 saw the largest weekday group gain, up 11.1% compared to 5.4% in the top 25 markets. However, the top 25 markets saw group growth across all day categories, while weekend group was down elsewhere over the weekend. Group ADR was also strong across the rest of the country, up 7.4% compared to 4.7% for the top 25 markets. Transient ADR was basically flat (+0.8%) with the top 25 markets increasing 1.3% and transient ADR for the rest of the country unchanged.
What US Hoteliers Can Expect
There are different schools of thought on what the summer will bring for hoteliers in the U.S. given current economic pressures. Could the lessening of occupancy decreases in economy hotels signal better times ahead for all? Only time will tell.
The outlook, based on economic factors, suggests the next eight months will be better than the previous four. However, significant headwinds remain, especially for lower- to middle-income travelers, due to the higher cost of living. Overall, the media and plenty of qualitative research points to another strong summer.
Global Occupancy Moves Ahead
After falling in the previous week, global occupancy excluding the U.S. rebounded, increasing 1.2 percentage points to 70.5%. Growth was mostly from outside the 10 highest supply countries, where occupancy increased 1.8 percentage points versus 0.9 percentage points in the top 10. Germany and Indonesia saw the largest gain in occupancy, rising by 8.6 percentage points and 6.5 percentage points, respectively. Occupancy was lower year over year in China, but the country’s absolute level rebounded to 71.7% from 59.4% in the previous week.
Germany and Indonesia also led the top 10 in RevPAR growth with RevPAR increasing by more than 28% in both countries on double-digit ADR growth. Overall, global RevPAR was up 7.8% via a 5.9% ADR increase.
The world’s highest occupancy was in Ireland at 89.3%. This was the first time this year that the country took the top spot; Ireland was in that position numerous times last year. The country has either had the second- or third-highest occupancy in the world over the past five weeks, which likely signals the start of vacation season.
In the top 10 countries, the U.K. posted the highest occupancy at 82.4%. Since the beginning of the year, the country has ranked first, second or third in occupancy in every week, except the first.
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.