U.S. hotel revenue per available room decreased 5.2% year over year in the first week of September, ending seven weeks of gains.
Some have blamed the decrease on the early Labor Day, which fell this year on September 2, but there is no proof that is the case. Of the 14 occurrences of an early Labor Day between September 1-4 since 2000, this year’s weekly hotel occupancy decrease was the fifth largest.
While U.S. hotel occupancy also fell in 2019 when Labor Day was on the same date as this 2024, this year’s decline was steeper. All sectors fell, including the top 25 U.S. hotel markets, chain scales, and group and transient segments. Every day declined with weekends hit the hardest. This suggests that other factors are at play, including the compounding impact of inflation, high interest rates and changes in travel behavior.
Occupancy declines responsible for much of the RevPAR decrease
The year-over-year decrease in weekly RevPAR was led by occupancy, which was down 2.5 percentage points. Average daily rate also fell 1%. The top 25 hotel markets and all other markets in the U.S. produced equal RevPAR declines, down 5.2% year over year. The largest decline was on the weekend, when hotel RevPAR fell 7.8% on Friday and Saturday, with occupancy down 4.1 percentage points. RevPAR on the weekdays from Monday to Wednesday fell 4%, and on the shoulder days Sunday and Thursday it dipped 3.2%, with occupancy driving the decline in both parts of the week.
Labor Day week through September 7 was weak any way you cut it. U.S. hotel room demand was in the middle of the pack (9 out of 25) as 22.9 million hotel rooms were sold versus 23.8 million a year ago and 23.3 million in 2019. Weekly occupancy was 57.8%, down 2.5 percentage points versus a year ago. By grouping all U.S. hotel markets based on supply in six buckets of 25 and one with 21 markets, we noted that hotel occupancy was down across the board with the top 25 markets losing 2.6 percentage points of occupancy and the remaining down between 2.1 and 3.3 percentage points. ADR was down the most among the smallest markets by about 3% with the top 25 markets down 1.1%.
Labor Day weekend was decent compared to the past
The three-day Labor Day weekend was decent for the U.S. hotel industry. Of the 25 Labor Day weekends where hotel data was collected by STR, this Labor Day weekend ranked fifth in terms of total demand with 12 million room nights and ahead of last year at 11.9 million. The most hotel rooms ever sold for the Labor Day weekend was 12.2 million in 2021. Hotel occupancy for the weekend was 70.7% compared to 70.8% a year ago. The highest Labor Day weekend occupancy was seen in 2018 (74.9%).
Nominal ADR was the highest ever for the weekend at $169, up 0.8% from a year ago. The growth rate was slightly better than last year at 0.6% but well below the long-term average of 3.1%. Adjusting for inflation, real ADR was the fourth highest for the holiday weekend but down 1.5% from a year ago.
All said, holiday weekend RevPAR increased 0.7% after falling 1.4% a year ago. Labor Day itself saw occupancy of 40.6%, down 1 percentage point from a year ago. This is the third consecutive year where occupancy has fallen for the holiday. This year’s occupancy ranked ninth overall with the measure ranging from 32.9% in 2009 to 44% in 2021.
Summer 2024 produced the third highest room demand
Looking at the Friday of Memorial Day weekend to Sunday of the Labor Day weekend, U.S. hotel room demand reached 390 million. Summer 2024’s demand was the third highest since daily record-keeping began in 2000, just behind 2018 (397 million room nights sold) and 2019 (401 million). On a per capita basis using total employment for the calculation, the U.S. hotel industry sold 2.5 rooms for every employed person this year versus 2.6 in 2019. The per capita measure has been down for the past five years.
U.S. hotel occupancy this summer achieved 68.2%, flat to last year and down from 72.3% in 2019. From 2014 to 2019, summer occupancy was above 72%. ADR was up 1.2%, slightly lower than a year ago and like what was seen in 2019. Both nominal ADR and RevPAR were at record highs but when adjusting for inflation, the metrics ranked eighth and 11th, respectively, over the past 25 years.
Chain-scale RevPAR decreased across the board due to occupancy declines
RevPAR declined across all chain scales, ranging from down 4% to down 5.6%, driven primarily by falling occupancy. Upper-upscale hotels saw the largest occupancy drop of 3.1 percentage points, resulting in a 5.5% RevPAR decrease. Upscale followed with an occupancy drop of 2.8 percentage points with RevPAR down 5.6%. Luxury posted the smallest RevPAR decrease – down 4% – with the bottom three chains scales seeing RevPAR declines of 5% or more. ADR declines were smallest in luxury (-0.2%) and upper upscale (-0.5%). The remainder of the chain scales saw decreases of 1% or more with economy hotels down 2%.
Labor Day softness seen across most markets
Only eight of the top 25 U.S. hotel markets saw RevPAR increases with Houston (18.5%), St. Louis (9.9%), Detroit (9.2%) and Philadelphia (8.2%) posting the highest RevPAR gains. Across the next 25 largest markets, Charlotte, North Carolina and Salt Lake City were the top two of eight markets seeing RevPAR gains.
Group performance stalled after a seven-week growth streak
Group demand in luxury and upscale hotels also slowed, down 8.5%, following seven weeks of growth. Group ADR increased 2.3% despite the decrease in demand. The markets mentioned above – minus Houston – posted positive group performance. New York City – which hosted the final week of the U.S. Open – and Tampa also benefitted from improved group demand at their hotels. Transient demand was also down 2.7% across the top 25 markets as was transient ADR, which fell 1.5%.
US hotels are ready for fall season
This past week served as the proverbial bridge between summertime leisure and the start of the fall business season. The next few weeks will be led by events and conferences along with fall sporting events and festivals. October is expected to slow due to the movement of the Jewish holiday observances, which falls in October this year. As a result, we expect September comparisons to be easier due to their movement.
Global performance just barely held on to a 14th week of RevPAR of gains
Global hotel performance improved for a 14th consecutive week, the result of rising ADR (3.5%) as occupancy declined 1.4 percentage points. Overall, global hotel RevPAR was up 1.4%.
ADR was also responsible for RevPAR gains across three top countries. Mexico topped the list for the second consecutive week with RevPAR up 6.2% on a 21.1% ADR gain offsetting a 4-percentage-point occupancy loss. Spain and Indonesia followed with RevPAR up 14.2% and 12.7%, respectively. China posted a RevPAR decline of 5.9% this week following an increase last week, its first since June. Most markets across China posted RevPAR declines including its 10 largest ones, except Beijing (11.8%). Macau was also up and led the country (19.7%).
Global hotel performance is expected to slow as summer comes to an end but remain stronger than in the U.S.
Isaac Collazo is vice president of analytics at STR. Chris Klauda is senior director of market insights 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.