The U.S. hotel industry experienced record room demand during the Fourth of July holiday, despite challenges in occupancy rates due to supply growth.
The Fourth of July holiday serves as a critical barometer for leisure travel and lodging demand in the United States. This year, amidst ongoing macroeconomic pressures and weakening hotel performance metrics, the holiday weekend was under intense scrutiny.
However, the U.S. hotel industry surpassed expectations by achieving record-high room demand. For only the second time since daily reporting began in 2000, the industry sold over 4 million rooms on July 4. Specifically, 4,092,239 room nights were sold, surpassing the previous records set in 2014 and 2015 by more than 3,000 rooms.
Surrounding Days Show Healthy Demand
Expanding the analysis to the entire holiday week, room demand reached 24.42 million, aligning closely with the past two years. However, this figure was still lower than the highs recorded in 2019 (25.08 million) and 2015 (26.64 million). When focusing on the weekend, demand was the third highest among Fourth of July holidays that fell on a Friday or Saturday. This indicates a robust interest in leisure travel during the holiday period, despite broader economic challenges.
Occupancy Rates Face Challenges
While room demand was strong, occupancy rates did not fare as well. The growth in hotel supply, both in the short and long term, contributed to lower occupancy levels. For the full week, occupancy was recorded at 61.1%, which is lower than the previous two years and significantly below the high of 68.2% in 2015. Among Fourth of July holidays that fell on a Friday or Saturday, the occupancy rate of 71.7% ranked fifth. This trend highlights the impact of increased supply on occupancy metrics.
Demand Growth Across Most Segments
When comparing this year’s Fourth of July holiday to previous ones that occurred on Fridays and Saturdays, room demand increased across all chain scales except for the Economy and Independent segments. However, due to the supply growth, occupancy rates were lower across all scales. This indicates that while more rooms were sold, the proportion of occupied rooms did not keep pace with the increase in available rooms.
Fluctuations in Average Daily Rate (ADR)
The shift of the holiday from Thursday last year to Friday this year led to year-over-year fluctuations in the average daily rate (ADR). On July 4, which was a Friday, the ADR increased by 3.4%, whereas on July 3, a Thursday, it decreased by 7.8%. Smaller increases were observed earlier in the week, from Sunday to Tuesday, which aligns with previous analyses of forward-looking occupancy. The Friday holiday allowed more time for business travel and group bookings. Overall, the ADR for the week was down by 0.9%.
Continuation of Recent Trends
The trends observed during the Fourth of July week are consistent with those seen in the late-spring and early-summer periods. While demand has remained steady, occupancy rates have declined due to supply growth. Rate growth is softening, and revenue per available room (RevPAR) remains flat to slightly down. The lack of growth in top-line revenue continues to exert pressure on profitability. Recent months have shown that real growth is stalled, highlighting persistent margin compression. Hotel operators are still grappling with the impact of higher operational expenses and inflation.
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