Chicago Hotel Market Q2 2024: Pricing trends, booking patterns, and short-term rental growth
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TTM hotel pricing in Chicago begins to increase in Q2 2024
One of the most prominent trends we saw in 2023 was the ongoing softening in hotel pricing. For Chicago, this trend began at the end of Q2 2023 and persisted through the balance of the year and Q1 2024. The pricing data(1) for Q2 2024, however, shows that the pricing decline may have reached its nadir, as May 2024 began an upward trend of Trailing 12 Month (TTM) pricing, with TTM pricing increasing month-over-month in each May, June and July 2024.
Pricing for the overall US continues to gradually decline
Unlike Chicago, which may be reversing course, the broader US has been experiencing a downward sloping TTM price curve since May 2023. That said, it is worth noting that in comparing the US TTM pricing on a month-to-month basis, declines appear to be leveling off – TTM pricing for February through July 2024 were all within 90 cents of each other, with the month-to-month declines in TTM pricing largely shrinking in magnitude with each passing month.
Comparing price from H1 2023 to H1 2024, Chicago exhibits modest (positive) growth
It’s also worth noting that, among the regional cities examined, Chicago’s 1.7% pricing growth when comparing H1 2024 to H1 2023 represents the second smallest positive growth metric, ahead of Detroit, which did technically experience positive growth over the aforementioned time period, albeit only 0.1% growth. Milwaukee, on the other hand, experienced the largest decrease in pricing among the cities examined, with actualized price in H1 2024 representing a -5.7% decrease YoY relative to that of H1 2023.
Hoteliers continue trying to drive pricing in H2 2024
Through much of the first half of 2024, actualized pricing in Chicago mostly fell short, on a weekly basis, in comparison to the equivalent week from 2023 (red shaded areas). The data shifted, however, in May, when weekly actualized pricing in 2024 began to consistently exceed the equivalent week’s pricing from 2023 (green shaded areas). Other than a few exceptions, 2024 weekly pricing from the week of May 13th onward exceeded the 2023 equivalent. Based on advertised prices for the balance of 2024, hoteliers appear poised to capitalize on this momentum, with advertised pricing largely eclipsing the equivalent actualized week from 2023.
Pricing starts (and stays) at a discount relative to final pricing
When examining the price evolution for Chicago hotel stays in Q2 2024, there was a complete and fundamental shift from the pricing evolution from Q2 2023. In Q2 2023, hotel prices, on average, began from the 120-day lead time mark at a premium of approximately 8.0% in comparison to the final price (i.e. the lowest bookable rate for a given property on the date of stay). This premium gradually diminished, until pricing shifted to a discount roughly 3 weeks ahead of the stay date, with such a discount peaking at roughly -3.3% (relative to final price) about a week before the stay date, after which price ramped back upward. Conversely in Q2 2024, at the 120-day lead time mark, pricing began at an approximate 4.9% discount relative to final pricing. Similar to Q2 2023, around 1 week before the stay date, the discounting began to diminish quickly, ultimately followed by a marginal pricing premium for the two days immediately before the stay date.
Advertised hotel pricing for first half of Q4 remains largely unchanged vs. 90 days ago
Looking back retroactively to May 6, 2024 and comparing advertised hotel pricing for the latter portion of 2024 to advertised pricing for those same Q4 dates as of August 5, 2024, prices appears nearly identical. Conversely, looking at advertised pricing from September 2024 through October 12th, advertised pricing increased by approximately 2.8% on average, when comparing advertised prices as of May 6th versus August 5th. From the dates October 13th through November 12th, however, advertised prices were largely unchanged, with prices only increasing by an average of 0.7% over the time period from early May to early August.
Length of stay search data by lead time
Lighthouse’s search data can be used to create a lead time demand outlook by length of stay (LOS), which can be used to identify booking trends for LOS based on lead time ahead of arrival date. The 60-day lead time outlook for Chicago below, which is an aggregate of all Lighthouse’s 2023 search data, shows that at day 21, three weeks ahead of arrival, Chicago experiences a notable uptick in LOS 4-7 searches, and then on day 14, two weeks ahead of the stay date, there is a marked jump in the ratio of LOS 1 searches.
Short-term rental supply in Chicago grew significantly since early 2022 (and recently leveled off)
It’s worth noting that when looking at units consisting of 0 or 1 bedroom (i.e. those most comparable to a traditional hotel room), June 2024 supply of 5,100 units actually fell short of the previous peak of studio + 1 bedroom supply of approximately 5,700 units from November 2019. Conversely, the current total supply of Chicago's short-term rental units (approximately 10,900 as of June 2024) exceeds that from November 2019 (nearly 10,300 total units), indicating that larger capacity units are the primary driving factor in Chicago’s short-term supply growth (which has leveled off considerably since Q4 2023). From mid-2019 through fall 2021, studio + 1 bedroom supply, in aggregate, consistently hovered around +/- 55% of total unit count, with that figure dropping to just above 46% as of current day with the acceleration of the supply growth of larger capacity units.
From January 2020 through June 2024, TTM short-term rental ADR in Chicago has grown approximately 47%
Comparatively speaking, the aggregation of studio + 1 bedroom short-term rental units achieved ADR growth of approximately 51% over the same time period(2). In 2019, the average monthly ADR premium of all units versus the aggregation of studio + 1 bedroom units was approximately 67%. This premium contracted considerably, with the average monthly premium of the total units aggregation over ranging from approximately 57% to 59% in each 2020, 2021 and 2022. Most recently in 2023, the total units premium regained momentum, growing to a monthly average of approximately 64%. Through H1 2024, the total units premium contracted again, down to approximately 60%, continuing the trend of fluctuation in relative pricing.
Occupancy for studio + 1 bedroom units is similar to occupancy for broader short-term rental pool
From 2019 through the first 2 years of COVID, occupancy levels(2) were very similar for studio + 1 bedroom units, in aggregate, in comparison to the aggregation of all short-term rental units. Most months were very similar, with the all units bucket frequently achieving a marginal occupancy premium of approximately 1 percentage point. The performance shifted, however, in April 2022, at which point the studio + 1 bedroom unit aggregation ramped up to achieve a consistent occupancy premium of roughly 2-4 percentage points each month. This trend persisted for nearly 2 years until March 2024, at which point occupancy levels for both aggregations synced up and remained nearly identical ever since.
(1)Actualized price for a given time period represents the average of the lowest bookable rates for a standard hotel room for all hotels within Lighthouse’s data set within the given geography, as of 10 days before each stay date within the time period in question
(2)Lighthouse’s short-term rental performance data is comprised of Airbnb data