Hospitality Investing News - Southeast October 2024

September marks the first time the Fed cut interest rates for the first time in four years. Additionally, September 2024 has showed a meager increase in performance year over year, unlike August’s year over year increases. Nationally, up until September 21, occupancy rose just +0.5%, ADR rose 2.0%, and overall RevPAR rose 2.5% according to Smith Travel Research (STR).

While previous months have showed a disparity in growth and demand between the top 25 hotel markets and the upscale and above of the chain scale, August ended off with this disparity shrinking due to all hotels being hit by lagging leisure demand. However, this gap bounced right back as we moved into the early weeks of September. 60% of weekly occupancy gains came from the top 25 markets, while 84% of the gain in weekend room nights came from non-top 25 hotel markets. All chain scales saw RevPAR gains except for economy hotels, which fell 0.4%. This growth was driven by increases in ADR, with upper upscale hotels showing a 2.9% increase and midscale hotels showing a 1.3% increase. Anticipated group demand is showing up for luxury and upscale hotels with a 3.7% increase year over year, this is the highest level since fall of 2019.

Mixed results across the board for hotels, companies’ and consumers’ savings accounts are still getting the brunt of rising prices of since the pandemic. This is forcing all to be more conservative about how they travel, how much they travel, and for how long. A major bright spot of all this is that supply for new hotel rooms has substantially decreased. Given these trends, it isn’t necessarily allowing hotels to capitalize on increasing numbers but removes the culpability of adding insult to injury. The one to take the place of adding insult to injury is continued rising hotel operating costs outside of even commonplace line items like labor and supplies. Now, line items, such as, insurance and property taxes are adding to already squeezed NOIs.