Mid-Year 2024: Leveling Off or Bottoming Out?
The workplace is now established as a hybrid location in the U.S. and globally. Leisure travel is now the dominant driver of hotel use, though this segment continues to soften. Group meetings are the new business travel and online communication dominates. Hotels continue to adapt to shifts in usage through design and pricing, but the translation of revenue strategies to bottom line benefits has been eroding as operating costs continue to increase and high interest rates temper investment. Nevertheless, industry participants anticipate modest but continued improvement in the next few years.
In the first quarter of 2024, the market’s performance moderated, but gains in the second quarter have supported RevPAR improvement compared to the first half of 2023, notably all driven by ADR. While supply growth has been constrained by the cost of debt and construction, it has still outpaced demand growth in the first half of 2024; resulting in a decline in occupancy. ADR continues to increase; though the strong gains of the post-pandemic years are now muted and below inflation. Overall, the second half of 2024 should bring greater clarity into pricing for investors and increased opportunity to acquire assets which have remained on the sidelines.
