Slow Summer Travel Season Leads to Weaker Q3 Hotel Fundamentals

Executive Summary

• Overall hotel occupancy fell by 0.8% year-over-year in Q3. This reflected a 0.1% drop in demand and a 0.6% increase in supply.
• A 0.6% increase in average daily rate (ADR) was offset by the decline in occupancy, leading to a 0.2% decrease in revenue per available room (RevPAR).
• Summer political conventions, hurricane displacement-related demand and the Jewish holidays falling in October this year were tailwinds in Q3. Nevertheless, Q3 performance was weaker than expected due to soft leisure travel and the slow return of international visitation.
• While hotel demand fell in Q3, lodging alternatives such as short-term rentals and cruise lines continued to report strong demand, up 24% and 15%, respectively, compared with Q3 2019.
• Given the decline in hotel job openings, hotel wage growth decelerated to 3.9% in Q3 from 4.6% in Q2, in line with the national average wage increase year-over-year. Average hourly hotel wages remained more than $10 below the national average hourly wage for all workers.
• Occupancy rates for all location types remained below 2019 levels in Q3. Interstate, suburban and town locations were the closest to their 2019 levels at 97%, while urban and resort locations were at 93% and 95%, respectively.
• Brand.com continued to gain on other distribution channels, increasing its share of demand by 3.4 percentage points (pps) since 2019 to 21.7%. Property direct, voice, and group channels experienced declines in their share of hotel demand.