Summer slowdown continues for US hotels as 2024 hurricane impacts begin to swing year-over-year performance

U.S. hotel industry performance was down for the week of August 3-9. Revenue per available room dipped 1.6% on an occupancy decrease of 0.7 percentage points and an average daily rate decline of 0.6%.

Muddying the results were the continued negative performance in Houston and Las Vegas and the impact of last year’s Hurricane Debby, which affected select southeast U.S. markets and created positive gains for those markets this year. Forty-eight percent of all U.S. hotel markets saw RevPAR decline in the week. Over the last six weeks, 42% of markets have seen RevPAR fall in three or more weeks.

Houston remained a significant drag for the top 25 U.S. hotel markets due to difficult comps from last year’s storms. Additionally, Las Vegas is also hampering the top 25 markets. Combined, Houston and Las Vegas account for 14% of hotel rooms in the top 25 and 5% of the total U.S. hotel supply. However, even when excluding these two markets, the RevPAR decrease in the top 25 markets (-2.5%) was nearly double that of the remainder of the U.S.

Hurricane Debby made landfall this week last year in the Big Bend region of Florida followed by a second landfall in South Carolina. The storm drove away hotel demand in several southeast markets including Augusta, Charleston, Columbia, Fort Myers, Georgia South, Jacksonville, Myrtle Beach, Tampa Bay, Savannah and South Carolina Area. This year, these markets saw hotel demand return to normal resulting in double-digit RevPAR growth.

Excluding Debby markets, U.S. RevPAR would still be down, but less so (-1.1%) and that’s true even if you exclude Houston and Las Vegas (-0.2%).

Luxury has been the only hotel chain scale to show consistent gains this entire summer, however RevPAR slowed this week to just a 0.1% lift. As with prior reported weeks, bifurcation continued with RevPAR becoming progressively worse in the lower chain scales, with economy hotels down 5.7%. When removing Hurricane Debby markets along with Houston and Las Vegas, luxury hotel RevPAR was down 1.3% and economy hotels were less negative, down 3.4%. Midscale and upper-midscale hotels improved by just under a percentage point while upscale and upper-upscale hotels were relatively unchanged.

Luxury and upper-upscale hotel group demand declined for the fifth consecutive week, dropping 6.2% this week. In the top 25 markets, group demand fell 9.6%. Even when excluding Las Vegas and Houston, group demand was down. Non-top 25 markets also declined 1.2% but less so than the larger markets. ADR remained healthy for both the top 25 (+3.4%) and U.S. hotel markets outside the top 25 (+2.1%). In contrast, transient demand among luxury and upper-upscale hotels has largely been positive most weeks this summer, with 1.9% more rooms sold last week while ADR dipped 0.8%.

Among the top 25, San Francisco continued to see strong RevPAR growth, up 22.2% this past week. In the prior week, it was up 33.2%. The past two weeks were lifted by the World Transplant Congress. So far this year, San Franciso has had 23 of 32 weeks of RevPAR gains, the most within top 25 markets. Among other top 25 leaders, Tampa Bay (10.2%) and Miami (8.9%) had favorable year-over-year storm comps. Dallas (+9.4%) and Detroit (+8.4%) round out the best RevPAR performers within the top 25.

On the negative performance side, Houston saw hotel RevPAR retreat 36.4%. New Orleans has struggled to fill hotel rooms all summer with recent occupancy registering 49.1% compared to 60% a year ago; its weekly RevPAR was down 20.3%. New Orleans was followed by Las Vegas, where RevPAR dropped 18.9%.

Continuing RevPAR deficits remain a concern in the U.S. as summer wraps up. The top 25 markets have been especially hard hit even after controlling for atypical comparisons such as storm impacts. Inflation and operational expenses continue to rise substantially faster than room revenues, which leads declining profit margins. In the coming weeks and months we will continue to see challenging year-over-year storm comps. All eyes will be on the fall conference and meeting season after a lackluster group performance this summer.

The Paris Summer Olympics took place last year from July 26 through August 11. As expected, it had a major impact on global hotel RevPAR this year due its ADR premium. Global RevPAR has declined for the past three weeks, retreating 3.7% this week due entirely to France. France saw a 61.7% RevPAR decline with ADR down 56.3% and occupancy falling 9.8 percentage points. Excluding France, global RevPAR rose 5.6% and has been positive for the past three weeks. In fact, it has been positive for all but three weeks this year. ADR has been the primary driver, increasing 5.5% year to date and 5.6% this week. Occupancy declined 0.5 percentage points this week and is down 0.4 percentage points year to date.

Japan, Canada and Spain all delivered top RevPAR gains this week following several weeks on top. China RevPAR was down as it has been for the past 13 weeks.

Global hotel RevPAR continued to grow, excluding France, and, while slowing, does not appear to be at risk of going negative anytime soon.

Isaac Collazo is senior director of analytics at STR. Chris Klauda is director of market insights at STR. M. Brian Riley is a senior 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.

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