Hotel Demand Falls Slightly in Q3

U.S. Hotel | Q3 2023

November 7, 2023 2 Minute Read

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Executive Summary

  • An 0.5% year-over-year decrease in Q3 hotel demand and 0.5% increase in supply led to a 1% drop in occupancy.
  • The average daily rate (ADR) increased 0.6% during the quarter, the slowest improvement since the pandemic recovery began 10 quarters ago. Revenue per available room (RevPAR) decreased 0.3%, as the modest occupancy decline was partially offset by the rise in ADR.
  • While consumer spending remained strong, competition from other lodging sources like short term rentals and cruise lines, as well as increased outbound international travel, stifled hotel demand and pricing power in Q3.
  • Hotel wage growth of 4.7% in September outpaced the national average of 4.3% but was down from 7.0% at year-end 2022. Average hourly hotel wages lagged the national average by nearly $10, suggesting that pressure for wage increases likely will persist.
  • Several smaller secondary markets in the South and Midwest were among the strongest RevPAR performers relative to 2019. On a year-over-year basis in Q3, RevPAR grew the most in Newark, Tampa, Houston and New York City.
  • Occupancy rates for all location types were below 2019 levels in Q3. Town locations were the closest to their 2019 level at 97%, followed by urban locations at 92%.
  • Total room nights sold decreased 0.5% year-over-year, driven by a 1.4% decrease in online travel agency (OTA) demand. Global distribution system (GDS) demand grew the most at 6.3%.