With occupancy levels expected to be relatively flat in 2024, according to research from hospitality consultants PwC, performance gains are once again expected to come almost entirely from average daily rate (ADR), with an expected year-over-year increase in RevPAR of 2.7% — approximately 117% of pre-pandemic levels.

The outlook for midweek travel remains unclear, according to the research, with some companies indicating changes to their business travel policies in efforts to tighten corporate budgets, as well as to achieve sustainability goals, according to PwC.

Leisure demand, while still strong, began to soften in the second half of this year for US hotels, as other parts of the world continued to reopen their vacation destinations and leisure travelers began to feel safe traveling abroad once again.

Increases in individual business travel and group business have not yet been able to fully offset this softening. As a result, occupancy levels have declined in each of the past seven months, relative to comparable 2022 levels, and are expected to continue to go down during the remainder of this year and through at least the first quarter of 2024. Room rate growth played a significant role in the initial recovery for US hotels but softened significantly in the second quarter before falling to below inflationary growth levels in the third quarter. That said, ADR growth is expected to begin to increase and slightly exceed a declining inflation level beginning in the fourth quarter and into next year.

The Federal Reserve’s continued increases in its policy rate, continued declines in the public markets since early August and, more recently, the war in Israel have begun to have a downstream impact on hotel demand, according to the research.