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Lodging Demand Grows: Year-to-Date Trends and Record Revenues

Thursday, December 19, 2024 Research

Puerto Rico Tourism Sees Record Lodging Revenue and Shifting Market Trends in 2024

Year-to-date estimates through November from STR (Smith Travel Research) and AirDNA indicate that lodging demand has reached nearly 6.7 million room nights, a 7% increase compared to the same period last year. While hotel room demand has remained steady, rental accommodations have experienced significant growth, with an 18% year-over-year increase.

November lodging demand followed unusual trends, thanks in part to slow demand during the beginning of the month due to the elections and a late Thanksgiving holiday. While estimated hotel demand was flat (-0.3%), hotels maintained steady average rate growth, with November hotel ADR at $280, an increase of 7%. November rental demand estimates suggest over 229,000 room nights booked, an increase of 17% compared to last year and accounting for 45% of the total demand market share.

Increases in overall lodging demand with strong hotel rates have pushed lodging revenues to record levels. Year-to-date lodging revenue estimates through November have reached $1.7 billion dollars, an 8% increase from last year and 104% more than in 2019.

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The updated national hotel forecast released in August by Tourism Economics and STR anticipates hotel demand in the U.S. will experience growth of less than 1% in 2024 before gaining momentum in 2025. Growth in the group segment and international arrivals will help offset softness in domestic travel. Softening demand is particularly noticeable among lower-price hotels where economic headwinds are impacting some household budgets. The modest growth in hotel demand is projected to be matched by growth in the hotel supply, leaving the annual occupancy rate unchanged from 2023 to 2024 at 63%. Room revenue is forecast to grow 2.7% in 2024, primarily from 2.0% growth in ADR.

In looking at the local rate strategies, hotels have been able to keep rates like last year, with a year-to-date growth of 1% at $291, peaking at $381 in March of this year. As many rental properties are independently managed and have increased supply and hence competition in this sector, average rates have seen decreases of 5% since last year, averaging $229 with little seasonal change.

Contrary to the rental market, hotels have managed revenue yields according to seasonal demand. While rental properties enjoy a $15 spread between its highest and lowest ADR months, hotels have created a $170 spread between March, which was the peak of the season, and September of this year. Because of this strategy, hotels currently account for two-thirds of total lodging revenue despite increases in market share from the rental segment.

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Since the launch of Discover Puerto Rico, building the brand has been paramount to the organization. To monitor its marketing efforts, it regularly conducts brand health measurements to monitor the three KPIs determined to be critical to the success of the brand. The three primary KPIs of familiarity, perception, and likelihood to visit are destination measures that can take decades to move. While there were steady increases in the first four years of DMO’s existence, all three KPIs have seen notable movement since the launch of Live Boricua in 2022.

As of this year, study results show that 48% of respondents have a positive perception of Puerto Rico, and 25% are likely to visit in the next year, which is a ten-point increase since 2019. Meanwhile, familiarity with the Island has increased by 9 points since the beginning of Discover Puerto Rico’s efforts, with 45% of respondents expressing that they are familiar or very familiar with the Island. Improvements in these hard-to-move KPIs just don’t happen without intentional messaging.

The movement of these metrics reflects the work of Discover Puerto Rico and the success of the Live Boricua campaign, which invites travelers to immerse themselves in authentic Puerto Rican experiences alongside locals.

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According to the 2024 Discover Puerto Rico Visitor Profile study conducted so far this year, visitors to the Island enjoy a myriad of local activities throughout their visit. By generation:

Gen Z: Enjoys active trips; more likely to participate in hiking, watersports, nightlife/concerts, and go to beaches and bars or pubs.
Millennial: Similarly active as Gen Z, but complements visits with historical sights, shopping, and are less likely to visit casinos compared to other demographics.
Gen X: Hiking, museums, festivals, and historic sites are sought after. More likely to travel with a spouse, kids under 18, and/or extended family.
Baby Boomers: Compared to other travelers, their most popular activities include restaurants, shopping, spas, golf, casinos, and festivals. They tend to avoid hiking but do enjoy water activities.

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