The U.S. hotel industry experienced another significant downturn with revenue per available room (RevPAR) for the week of July 13-19 decreasing by 3.3% compared to the same week last year.
This decline reflects only a slight improvement from the previous week’s RevPAR drop of 3.7%.
Hotel room demand fell by 1.8%, which was identified as the primary factor contributing to the overall RevPAR decrease.
Additionally, average daily rates (ADR) slipped by 0.7%.
With annual room supply increasing by just 0.8%, weekly occupancy levels reached 71.6%, marking a decline of 1.9 percentage points compared to the same period last year.
Metro markets saw the most significant RevPAR declines, with the top 25 U.S. markets experiencing a 4.3% drop and metro areas outside the top 25 falling by 4.7%.
Three key markets had particularly negative impacts on performance: Las Vegas, Houston, and Los Angeles.
In Las Vegas, RevPAR dropped a staggering 17.1% largely due to reduced demand.
This decline has been attributed to a decrease in international arrivals, shifts in group and meeting schedules, and economic pressures on middle- and lower-income households.
Meanwhile, Houston hotels faced a dramatic 38.3% RevPAR decline, largely due to tough comparisons with displacements from Hurricane Beryl last year and the earlier “Derecho” storm.
Los Angeles, particularly within its central business district, witnessed both demand and ADR drop, leading to a RevPAR decrease of 8.9%, and a staggering 17.8% drop for central business district hotels.
Excluding these three markets, U.S. hotel RevPAR would have still shown a decline, but only by 1.9%.
Total U.S. ADR, without considering the influence of Houston, Las Vegas, and Los Angeles, also remained weak, reflecting a minimal decline of 0.2%, remaining below the rate of inflation.
In the top 25 markets, RevPAR was relatively flat at a decrease of 0.6% when excluding those three markets, while ADR rose by 1%.
Metro markets outside the top 25 reported the most notable RevPAR decline of 4.7%, along with the largest ADR drop of 2.8%.
Non-metro and rural markets also faced declines of 1.1%, almost entirely due to a 1-percentage-point decrease in occupancy.
Looking at trends since Memorial Day weekend, hotel demand in the U.S. has decreased by 1.6 million room nights, or 0.7% on a year-over-year basis, with ADR remaining flat, showing only a slight increase of 0.1%.
Among various chain scales, only the luxury segment has reported RevPAR growth, albeit with all other scales, except economy and independent hotels, seeing positive demand trends.
However, despite increased supply, summer hotel occupancy rates have declined across all chain scales.
Weekend hotel RevPAR fell by 2.5%, primarily affecting the top 25 markets, while markets outside the top 25 saw a more modest dip of 0.9%.
Weekday RevPAR from Monday to Wednesday and during shoulder days on Sunday and Thursday fell by more than 3%, primarily due to reduced occupancy alongside flat-to-declining ADR levels driven by the top 25 markets.
Excluding the underperforming cities from the top 25, the remaining markets experienced stable weekday RevPAR with a minor increase of 0.1% owing to rising ADR.
However, weekday RevPAR in areas outside the top 25 fell by 3.5%.
The luxury hotel segment continued to perform positively, as RevPAR increased by 1.5% fueled by a 2.2% rise in ADR.
Despite facing negative occupancy comparisons recently, this decrease can largely be attributed to rapid supply growth in the luxury sector, which recorded a substantial year-over-year increase of 5.3%.
A healthy yet lower rate of luxury room demand also contributed to the declining occupancy levels.
In contrast, mid- to lower-end chains, particularly economy hotels, faced greater challenges.
Economy hotels had managed to hold their ground during the pandemic when luxury hotels struggled, but recent statistics show a concerning 7% drop in RevPAR for these economy chains.
The declines in this segment have been evenly spread across occupancy, which fell by 4.0%, and ADR, which decreased by 3.2%.
With total supply in the economy segment retracting by 0.9% year-over-year, conditions for these hotels might be even less favorable than indicated by topline metrics.
The recent weeks have illustrated softer-than-anticipated performance in U.S. hotels, highlighting a blend of both positive and negative market signals.
As markets move toward the end of the year, particularly through September and October, year-over-year comparisons may pose challenges due to significant weather events and sociopolitical headwinds, which have impacted demand in certain regions.
Notably, interpretations of national and market-level performances will require careful analysis as Hurricane Helene in September and Hurricane Milton in October are recognized for their prior disruptions.
However, in the face of this data, optimism has emerged.
American Airlines CEO Robert B. Isom suggested, “July will be the low point and that performance will improve sequentially each month in the quarter as demand strengthens.”
On a global scale, hotel RevPAR has shown an increase over the past three weeks, with a 0.5% rise recorded in the most recent week, driven entirely by ADR.
Despite a fall in occupancy, down 1.3 percentage points from last year, the 72.2% occupancy rate is the highest recorded so far this year.
This trend of decreasing occupancy has continued for five weeks.
Countries performing best in the past four weeks include Japan, which retained its top RevPAR position throughout the year.
While occupancy in Japan has slowed, ADR continues to rise, particularly in Osaka, which has experienced significant RevPAR gains.
Canada has also shown promising results, with a second consecutive week of high RevPAR growth, seeing ten of its 22 markets report double-digit increases driven by both ADR and occupancy improvements.
Spain’s RevPAR advanced over 5% for the third consecutive week, with most gains coming from the Canary and Balearic Islands, despite recent negative comps in Barcelona and Madrid.
U.K. hotels experienced another strong week, with four of five major markets increasing RevPAR, prominently led by Manchester with a 25.8% jump.
Conversely, France and Germany reported declines due to calendar shifts impacting sporting events, while China’s RevPAR fell by 6.7%, with major cities like Beijing and Guangzhou seeing large drops.
This comprehensive analysis of current U.S. and global hotel industry trends indicates a challenging environment, yet highlights potential for recovery in various segments and regions.
image source from：costar
