Washington, DC Hotel Market Q3 2024: Pricing trends, booking patterns, and short-term rental growth

Hotel pricing in Washington, DC shows signs of acceleration in Q3

Dating back to May 2023, TTM hotel pricing⁽¹⁾ in Washington, DC has been remarkably stable. From May 2023 through July 2024, TTM hotel pricing reliably ranged from $252 to $255. Pricing in Washington, DC took longer than other markets to recover from COVID, but once pricing reached stabilized levels, it remained stably in the aforementioned range for 15 consecutive months. Given the market’s heavy reliance on government travel, this sort of stability is to be expected.

In Q3, more specifically in August and September, TTM pricing began to show signs of acceleration, with TTM pricing in August reaching $256 and further month-over-month growth to $258 in September. Coupled with the very slow yet stable decline of pricing in the broader United States, the TTM pricing premium achieved by Washington, DC over the greater US is slowly creeping upward, surpassing the 80% threshold as of September.

YOY pricing growth patterns observed in Q3 similar to those from Q2

For the most part, the selected eastern US markets analyzed continued their strong YOY performance in Q3. Among those markets studied, only Pittsburgh and Virginia Beach experienced YOY pricing declines in Q3, with each Baltimore, New York, Philadelphia and Washington experiencing positive YOY pricing growth in Q3. This was a similar growth pattern observed in Q2, when again, Pittsburgh and Virginia Beach were the only two cities to experience YOY declines in pricing. Washington did, however, demonstrate acceleration, with 2.1% YOY pricing growth in Q2 accelerating to 7.0% YOY in Q3. Comparatively speaking for Pittsburgh and Virginia Beach, the YOY declines in Q3 slowed down, coming off Q2 YOY declines of 5.8% and 6.5%, respectively.

A turnaround in weekly pricing in 3Q 2024

Analyzing the 14-week stretch from the week beginning July 1st through the week beginning September 20, 2024, weekly pricing in 2024 surpassed that of the equivalent week in 2023 in all but 2 weeks. Two of the positive-growth weeks were close to being negative (growth for the weeks of July 1st and September 2nd were each less than 0.4%), however the positive growth across all other weeks over that time span was 5.9% or greater. This represents a marked turnaround from the first half of 2024. Averaging the YOY growth rates for each of the 26 weeks in the first half of 2024 results in negative YOY average growth of -0.9%. In comparing advertised pricing for the balance of 2024 relative to actualized pricing for the equivalent weeks in 2023, average growth equates to 11.2% YOY. If these prices actualize close to these levels, we would see further price acceleration in the market.

A shift in price evolution evident in Q3 2024

Despite price showing signs of acceleration in the Washington DC market in Q3 2024, the price evolution curve driving that acceleration shows a different strategy than what was employed in Q3 of the prior year. In 3Q 2023, advertised pricing at the 120-day lead time mark represented an approximate 2.9% premium relative to to final price (i.e. the lowest rate bookable on the stay date itself), with the premium beginning to ramp downward fairly precipitously around the the 90-day lead time mark, with the price data flipping to a discount relative to final price around the 80-day mark. This discount grew until a discount of approximately -3.2% was reached around a week before the arrival date, after which the discount rapidly diminished until price finalized on the stay date.

In 3Q 2024, the pricing curve was quite different. At the 120-day lead time mark, advertised pricing was at an approximate 1.4% discount relative to final price, and a degree of discounting was maintained until final price was reached on the stay date. At no point during the 120-day lead up was average advertised pricing at a premium relative to final price.

Forward looking hotel prices for the next 90 days have mostly adjusted downward

Pricing for Q4 2024, as well as pricing for early January ‘25, has largely adjusted downward relative to where prices stood for those same dates as of 90 days ago. When comparing prices for the 90-day stretch from October 16th through January 12th, pricing as of September 30th was on average 3.8% lower than prices for those same dates as of July 1st, though it is worth noting that there are a few stretches where the July 1st advertised prices were significantly outpaced by those prices from the September 30th outlook.

From a day-of-week perspective, Sunday night pricing was the most heavily impacted by the price declines, with Sunday night advertised prices declining by an average of 6.4% over the aforementioned time period. Conversely, Tuesday and Wednesday nights were the least impacted, with prices coming down by a modest -1.1% and -1.4%, respectively, since the July 1st pricing outlook.

Short-term rental supply has been climbing steadily since September 2022

However it’s worth noting that short-term rental supply as of September 2024 is still below pre-COVID levels. Short-term rental supply in Washington, DC had actually been on the decline since before COVID started. Total short-term rental supply in Washington, DC was roughly 9,400 units in January 2019, and in January 2020, right before the start of COVID, supply was down to 8,400 units, a year-over-year decline of roughly 10.8%. Supply continued to decline until the supply nadir was reached in September 2022, when total supply was approximately 6,300 units, or approximately 32.8% less than that of January 2019. Since the September supply trough, total supply has steadily been on the rise, increasing to 8,400 total units as of September 2024, of which a bit more than half, or approximately 4,600 units, are studio or 1 bedroom units (i.e. the units most similar to a traditional hote room). Despite this run-up in supply over the past 2 years, total supply and the aggregation of studio + 1 bedroom supply, are still down approximately -10.8% and -26.3% from January 2019 levels.

Since November 2022, market-wide short-term rental ADR appears to be growing in parallel to ADR for studio + 1 bedroom units

During the early stages of COVID, market-wide TTM ADR⁽²⁾ for Washington’s short-term rental market was achieving a stable premium in the low-to-mid 40% range over the aggregation of studio + 1 bedroom units. At the end of 2020, TTM ADR for the studio + 1 bedroom aggregation began accelerating quite a bit quicker than that of the broader market, shrinking the market-wide TTM ADR premium to 24.2% by November 2021. Following this run up, ADR growth for studio + 1 bedroom units stagnated for about 8 months, and then declined until November 2022, at which point the low-to-mid 40% premium was restored for the total short-term rental market, and this premium has been maintained through September 2024, as the TTM ADR for both aggregations has since appeared to be growing in parallel.

Studio + 1 bedroom unit occupancy continues to outperform market-wide short-term rental occupancy (but the occupancy premium is shrinking)

From 2019 through 2021, the aggregation of studio + 1 bedroom short term rental units achieved a modest but consistent occupancy premium⁽²⁾ over the broader total market of all short-term rental units in Washington, DC. Over this two year span, the aggregation of studio + 1 bedroom short term units achieved an average monthly occupancy premium of 0.9 percentage points. Beginning in 2022, this premium began to expand - in 2022 and 2023, this monthly occupancy premium grew to an average of 4.9 percentage points. In 2024, however, this premium dwindled and shrunk back to a level more commensurate to the premium from 2019 through 2021, averaging 0.7 percentage points from January through September 2024.

⁽¹⁾Actualized lowest 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