Dive Brief:
- According to CBRE’s Q4 2023 U.S. Hotel report, there was a 1.8% year-over-year decrease in hotel demand with a 0.8% increase in supply, leading to a 2.5% drop in occupancy in the fourth quarter of 2023.
- This was partially offset by a 0.7% increase in average daily rates, resulting in a 1.9% decrease in RevPAR during the quarter.
- The report credits demand for alternative lodging sources such as short-term rentals and cruise lines, which was above 2019 levels, along with outbound international travel, for the decline in demand and RevPAR. But inbound travel is expected to boost occupancies in 2024.
Dive Insight:
Competition from alternative lodging sources, as well as strong outbound international travel, negatively impacted U.S. hotel demand in the fourth quarter of 2023.
According to CBRE, demand fell by 1.8% year-over-year in Q4 and 2% from Q4 2019. Combined with a 0.8% increase in supply, the industry experienced a 2.5% drop in occupancy. But a 0.7% increase in average daily rates helped buffer the blow, resulting in a 1.9% decrease in RevPAR during the quarter.
Specifically, ADR for upscale, upper upscale and upper midscale chains rose 2.5%, 2.2% and 1.1%, respectively, in Q4. The rest of the chain scales decreased, ranging from -1.6% for midscale to -0.7% for luxury year over year.
Some major hotel brands recently reported RevPAR growth for the same period though. For example, Hilton posted systemwide year-on-year RevPAR growth of 5.7%, while Marriott International reported 7.2% year-over-year growth in global RevPAR in the fourth quarter.
All top 10 markets — the Coachella Valley in California; Savannah, Georgia; Tampa, Florida; Cleveland; San Diego; Phoenix; Anaheim, California; Albuquerque, New Mexico; New York City; and Fort Worth, Texas — recorded RevPAR increases of 20% or more relative to Q4 2019, with Coachella Valley topping the list with a 35% gain, according to CBRE. But year-over-year declines in RevPAR growth were reported for Coachella Valley, Savannah, Tampa, San Diego and Phoenix.
On a year-over-year basis, several smaller secondary markets like Cleveland; Long Island, New York City; Albuquerque; Raleigh, North Carolina; Albany, New York; Richmond, Virginia; Pittsburgh; and Columbus, Ohio, were among the strongest performers. Newark, New Jersey, and Boston had the most year-over-year growth in Q4 at 11% and 10%, respectively.
The occupancy rate for urban locations increased by 0.8% year over year in Q4. For all other location types, the rate decreased both year over year and relative to 2019 levels. Interstate locations were nearest to their 2019 levels at 99%, while urban locations lagged at 92%.
As CBRE reports, demand for alternative lodging sources was above 2019 levels, with short-term rentals at 132% and cruise lines at 100.8%, dampening hotel demand. Outbound international passenger counts ended Q4 at 114.3% of the 2019 total, continuing to outpace inbound passenger counts at 85.4% of 2019 levels.
CBRE said it expects inbound travel to boost occupancies in 2024 as more international travelers return.
