Denver Hotel Market Q2 2024: Pricing trends, booking patterns, and short-term rental growth
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Hotel pricing continues to level off into 2024
One of the most prominent trends we’ve seen in 2024 is the ongoing softening of hotel pricing. This trend began in the latter half of 2023 and has persisted through the first half of 2024, as Denver hotels continue to experience resistance to driving price upward. The average actualized hotel price(1) of $184 for the trailing 12 months (TTM) as of June 2024 represents an approximate 2.8% decrease from the average monthly price actualized in 2023.
Pricing for the overall US continues to gradually decline
Like Denver, the broader US is tracking similarly and has been experiencing a downward sloping TTM price curve since May 2023. The effects of COVID brought Denver and the greater US to nearly identical pricing on a TTM basis through the first half of 2021, however as expected, Denver recovered at a more rapid clip and has consistently achieved an approximate 30% pricing premium over the US, on a TTM basis, from mid-year 2023 onward.
In H1 2024, pricing in Denver and Colorado Springs moved in opposite directions
Colorado Springs achieved YoY growth of 5.9% when comparing the 1st half of 2024 to the 1st half of 2023; however, it is worth noting that the H1 2024 actualized price of $128 was just 0.1% greater than that achieved in H1 2019, and -0.4% lower than that achieved in H1 2022. Actualized pricing for Denver, like many other major regional cities, exhibited a YoY decline in H1 2024, reaching -3.7% YoY.
Hoteliers continue trying to drive price in H2 despite largely falling short in H1
Through the midpoint of 2024, average weekly price consistently actualized short of the equivalent week from 2023 (red shaded areas), aside from a few instances when 2024 exceeded 2023 pricing. Despite these shortcomings in H1 2024, Denver hoteliers continue to attempt to increase pricing year-over-year, with pricing for the back-half of the summer, late fall, as well as the early winter, currently advertised above 2023 actualized levels (green shaded areas).
Fundamental YoY shift in price evolution in 2Q 2024
When examining the price evolution for Denver hotel stays in 2Q24, the data shows that 120 days ahead of the stay date, hotel rooms were priced an average of 4.3% higher than the final price (i.e. the lowest rate bookable on the stay date itself). This price premium gradually declined until the 43-day lead time mark, after which pricing flipped to a discount (relative to final price). Such discounting continued to amplify until the nadir of -4.8%, reached 7 days ahead of the stay date, after which such discounting quickly diminished.
The year prior, in 2Q23, the price evolution shows nearly the same nadir reached 7 days ahead of the stay date, and nearly identical price discounting/premium thereafter until the date of stay. What’s truly fascinating here is that, while the price evolution gets to the same point a week ahead of the stay date, the 2Q23 price evolution shows that price took a completely different path to arrive there. In 2Q23, pricing was at a discount, relative to final price, nearly the entirety of the 120-day lead time window. Pricing started at an approximate 1.3% discount to final pricing, gradually ramping up to ‘break even’ levels around the 80-day lead time mark, with discounting then ramping up again around the 60-day lead time mark. Such discounting grew until the 2Q23 price evolution trend line appears to link up with the 2Q24 trend line about a week ahead of the stay date, moving nearly in tandem thereafter.
For stays beginning in the next 90 days, most pricing movements have been downward
Looking back retroactively to April 29, 2024, hotel pricing for the latter portion of 2024 was, for the most part, higher in comparison to where those prices stood as of July 29, 2024 (with some exceptions). Consistent with the general regression in hotel pricing that the industry has experienced since the back half of 2023, destination-wide average pricing in Denver largely continues to trend downward. Over the dates in question (August 9th through November 6th), advertised price was an average of 3.5% lower as of July 29th in comparison to price levels for the same dates as of April 29th.
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 Denver below, which is an aggregate of all Lighthouse’s 2023 search data, shows that at day 21, three weeks ahead of arrival, Denver experiences a marked uptick in LOS 4-7 searches, and then on day 14, two weeks ahead of the stay date, there is a significant jump in the ratio of LOS 1 bookings.
Short-term rental supply in Denver has been growing steadily since '22
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 approximately 2,730 units actually fell just short of January 2019 supply of approximately 2,750 units. Conversely, Denver’s current total supply of short-term rental units (approximately 5,500 as of June 2024) exceeded the count of 4,980 from January 2019, indicating that the supply of larger capacity units is growing at a faster rate in Denver relative to studio and 1 bedroom units. From 2019 through late 2021, studio plus 1 bedroom supply consistently hovered around +/- 55% of total unit count, with that figure dropping to just below 50% as of current day with the acceleration of the supply growth of larger capacity units.
From January '20 through June '24, short-term rental ADR in Denver has grown approximately 32% on a TTM basis
ADR for the aggregation of studio + 1 bedroom short-term rental units in Denver very much appears to move in sync with total short-term rental ADR in the market(2), albeit at a fairly stable discount. On a TTM basis since 2020, the average ADR premium of all units versus the aggregation of studio + 1 bedroom units has been approximately 53%. That said, it’s worth noting that the all units TTM ADR premium has been diminishing. For 2020, the all units ADR premium was an average of 62%. In 2021, that premium reduced to 54%, followed by 51% in 2022 and 49% in 2023. Through H1 2024, the premium held at 49% on average, though technically 0.4 percentage points lower (49.2% for 2023 vs. 48.8% for H1 2024), continuing the downward trend of the all units TTM ADR premium.
Occupancy for studio + 1 BR units is almost identical to occupancy for overall short-term rental pool
With nearly identical occupancy levels(2), and very similar supply levels (i.e. studio + 1 BR units vs. all other size units), short-term rental demand in Denver is very balanced between larger short-term rental units, and smaller studio and 1 BR units which are more comparable to a traditional hotel room. There was a stretch from August 2021 through August 2023 where the pool of studio + 1 BR units achieved a small, but consistent, occupancy premium over the broader ‘total unit occupancy’ but otherwise, these two occupancy buckets have historically been nearly identical.
(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