Data shows October U.S. hotel RevPAR performance was a bit weaker than in September, indicating that difficult months lay ahead.
NASHVILLE, Tennessee—U.S. hotel performance started to show the first signs of trending in the opposite direction from the positive momentum seen over the summer.
Jan Freitag, SVP of lodging insights for STR and national director for hospitality market analytics at CoStar, said in a monthly data insights video that U.S. hotels’ October performance was a little worse than performance in September. (STR is owned by CoStar Group and is the parent company of Hotel News Now.)
With room demand down by almost a third year over year, U.S. hotel occupancy declined 30.1% in October. Average daily rate fell 26.8% to $97.61 and revenue per available room dropped 48.8% to $47.13.
“That of course means that there's very limited pricing power, although as we continue to say that these rate decreases are likely not impact of yield-management decisions, but rather an impact of mixture,” Freitag said.
U.S. hotel RevPAR declines had been getting better month to month but slowed as the extended summer leisure season ended. October was the first month since April with a worse RevPAR decrease than the previous month.
“The monthly performance data paints a picture that we already have alluded to as the number of (COVID-19) cases increases sharply across United States, business travel will continue to be curtailed and leisure travel will also be severely impacted,” Freitag said.
In October, limited-service hotels continued to outperform full-service hotels in the higher-class segments, Freitag said. More hotels continued to reopen across the segments, too.
“When you look at the number of closed properties across the board, the percentages have decreased,” he said. “We know that the TRI occupancy—the total room inventory occupancy—inches closer and closer toward the standard occupancy. Because more rooms are available on the upper upscale side, the increase in the group rooms does not show any occupancy increase. But what's good to see is that this third month in a row where the number of group rooms sold stood over 1 million rooms.”
The U.S. hotel pipeline in October comprised approximately 213,000 rooms in construction, down from the peak of 220,000 rooms in April.
“We fully expect that that number continues to decrease as projects open but very few new projects then backfill and actually break ground,” Freitag said.
Luxury hotels lead the way for the highest percentage of rooms in construction vs. existing room count, which is something to keep an eye on in the years ahead, Freitag said.
“If you think about the average length of construction for a luxury hotel is around three years or so, and then you divide that percent by three, you still get a very, very strong growth rate of around 4% per year,” he said.
For more of Freitag’s hotel data insights and more on STR’s latest forecast, watch the video below:
Editor’s note: The video included in this article was filmed by Jan Freitag, STR’s SVP of lodging insights and CoStar’s national director for hospitality market analytics, on 18 November and edited and produced by CoStar Group. HNN is a division of STR, a CoStar Group company.