Citing effects of a weaker-than-expected first quarter and
persistent inflation harming lower-tier demand, STR and Tourism Economics
substantially diminished their projection for 2024 U.S. hotel occupancy, rates
and revenue, the companies announced Monday. Still, executives said some data
points suggest business travel demand remains sturdy.
The upscale and upper upscale segments that have remained strong and will remain strong the rest of the year, that is group travel and continued improvement in transient business travel.”
– STR’s Amanda Hite
STR now projects full-year 2024 U.S. occupancy of 62.8
percent, markedly lower than the 63.6 percent the
company forecast in January, its most recent, and also lower than the 63
percent recorded in 2023. U.S. 2024 average daily rate now is projected to
increase 2.1 year over year, down from the 3.1 percent forecast in January.
Revenue per available room now is forecast to increase 2.0 percent year over
year, down from the 4.1 percent projected in January.
“It’s a pretty significant downgrade,” STR
president Amanda Hite said Monday during a panel at the New York University’s International
Hospitality Industry Investment Conference in New York. “It’s really
driven by the horrible first quarter that we had in demand declines.”
Hite said the revised forecast came after hotel demand
growth undershot U.S. gross domestic product growth, historically unusual as
the metrics typically correlate closely. Hite pointed to persistent inflation
that could be affecting lower- and middle-income Americans interest in travel
spending and noted that the upper upscale and upscale tiers significantly
outperformed the midscale and economy tiers.
She suggested that bifurcation between the performance of
higher and lower tiers would continue for the rest of the year.
That stronger upper-tier performance is a sign that business
travel demand remains durable, Hite told BTN.
“The upscale and upper upscale segments that have
remained strong and will remain strong the rest of the year, that is group
travel and continued improvement in transient business travel,” Hite said.
“If you look at the data in May, we have improvement and demand growth on
weekdays, and that’s mostly centered in top 25 markets,” adding that
weekday improvement is a traditional sign of strengthening business travel
demand.
STR and Tourism Economics for full-year 2025 projected U.S.
hotel occupancy of 63.2 percent, with ADR increasing 2 percent year over year
and RevPAR increasing 2.6 percent.
