### U.S. Hotel Industry Faces Lingering Challenges in 2024
The U.S. hotel industry grappled with a sobering reality in 2024: occupancy levels may not return to pre-pandemic peaks for several years. The primary reasons? A combination of steady supply growth and shifts in corporate travel behavior, rather than international travel or other commonly cited factors.
#### Occupancy Levels: The Numbers Speak
Nationwide, U.S. hotels averaged 63.9% occupancy in 2024, compared to 66.9% in 2019, according to data from [CoStar](https://www.costar.com), a leading hotel analytics firm. While a 3-percentage-point gap may seem minor, it represents a significant challenge when spread across diverse markets and property types.
Some cities fared better than others. In November 2024, New York City led the top 25 U.S. markets with an impressive 86.6% occupancy, followed closely by Houston. However, cities like Minneapolis (50%) and St. Louis (52.4%) struggled with much lower occupancy rates.
For hotel owners in underperforming markets, this shortfall may necessitate a strategic pivot. Options include targeting group business by adding meeting spaces, focusing on leisure travelers, or implementing aggressive cost-cutting measures.
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### The Role of Supply Growth
One key factor contributing to the rise in vacant rooms is the steady growth in hotel supply. Since 2019, the U.S. has added 618 net new hotels, according to CoStar.
“Small but steady supply growth means there are simply more hotel rooms to fill,” said [Jan Freitag](https://www.linkedin.com/in/janfreitag/), national director of hospitality analytics at CoStar Group.
While demand in 2024 was only modestly weaker than in 2019, the shortfall amounted to about 17 million fewer room nights booked. However, the addition of new hotels created an extra 58 million room nights available this year compared to 2019. Together, these factors explain the 3-percentage-point drop in occupancy.
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### Corporate Travel: Shorter Trips, Fewer Nights
Despite a relatively strong U.S. economy and airlines reporting a near-full recovery in corporate travel, hotel demand remains slightly weaker. One plausible explanation lies in the rise of hybrid work, which has altered traditional corporate travel patterns.
“Corporate transient travel has always been a significant driver of U.S. hotel demand,” said [Ryan Meliker](https://www.linkedin.com/in/ryanmeliker/), president and co-founder of [Lodging Analytics Research & Consulting (LARC)](https://www.larcanalytics.com). “In 2024, fewer people are consistently in offices, which means fewer multi-day business trips. Many are now compressed into overnight stays.”
Industries that traditionally fueled hotel demand—such as technology, insurance, financial services, and professional services—continue to embrace flexible work arrangements. For instance, audit firms that once spent weeks at client sites now conduct much of their work remotely.
Data underscores this shift. According to the [Flex Index](https://www.flexindex.com/stats), office utilization in the U.S. averages just 2.78 days per week. Kastle Systems’ office swipe data for 10 major metropolitan areas showed that Tuesday is the busiest office day, with 64% occupancy, while Fridays lag at just 35.5%.
While industry leaders like Hilton CEO Chris Nassetta and Marriott CEO Anthony Capuano remain optimistic about a full recovery in corporate travel, the data suggests that hotel occupancy may continue to lag pre-pandemic levels through 2025.
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### Other Factors Impacting Demand
The decline in hotel demand isn’t solely due to shorter corporate trips. Other minor factors include an increase in Americans traveling abroad and a slower recovery in inbound international tourism. These trends may normalize in the coming years.
Certain cities are also dragging down national averages. For example, Washington, D.C., has struggled to match 2019 occupancy levels. However, the city may rebound as major corporations like Boeing, Raytheon, and Amazon establish or expand headquarters in the region.
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### Profitability Over Occupancy?
Despite lower occupancy levels, some hotels are maintaining profitability by keeping room rates aligned with inflation and managing costs effectively.
“If occupancy is a little lower but rates are notably higher, hotels can still be profitable—provided costs are kept in check,” said Dan Peek, president of JLL Hotels & Hospitality for the Americas.
Many hotels have reduced costs by scaling back housekeeping services and adopting advanced revenue management software to optimize pricing. However, rising expenses, including new union contracts that reinstate pre-pandemic cleaning protocols and mandate higher wages, have eroded some of these gains.
For some properties, the missing 3 percentage points in occupancy represent a significant financial burden.
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### Stock Market Performance: Accommodations Sector
The financial performance of hotels and short-term rental companies is tracked within the [Skift Travel 200 (ST200)](https://data.skift.com/skift-travel-200/), an index that aggregates data from nearly 200 global travel companies. This includes international and regional hotel brands, hotel REITs, management companies, alternative accommodations, and timeshares.
For more details on the methodology and sector performance, visit the [Skift Travel 200](https://data.skift.com/skift-travel-200-methodology/).
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### Looking Ahead
While the U.S. hotel industry has made strides in recovering from the pandemic, challenges remain. Supply growth, evolving corporate travel habits, and rising costs are reshaping the landscape. As the industry adapts, the road to full recovery may take longer than initially anticipated.
Source: skift.com