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

TTM hotel pricing in Chicago continues its trend reversal

Last quarter, we observed what may have represented a trend reversal in TTM hotel pricing⁽¹⁾ for Chicago. With TTM pricing having been on a downward slope consistently since Q2 2023, we noted that TTM pricing began to show signs of improvement starting in May 2024. In Q3 2024, upward pricing growth began to show signs of acceleration, as Chicago’s TTM pricing took on a steeper growth curve. Moreover, following 11 consecutive months of YOY declines in TTM pricing, September 2024 broke that trend as well, with TTM hotel pricing in September 2024 experiencing 2.2% YOY growth from September 2023 levels.

TTM pricing for the overall United States, however, continued along its steady downward slope. This downtrend began in May 2023, and it has persisted through Q3 2024. When comparing TTM pricing each month on a YOY basis, it is worth noting that the YOY declines were -2.3% or greater from March through June 2024, and most recently in August and September 2024, the YOY declines were each less than -1.8%.

Chicago’s YOY pricing growth for Q3 ranks highest among select regional cities

Chicago’s 16.9% YOY pricing growth in Q3 2024 relative to Q3 2023 levels represented a huge acceleration in YOY pricing growth compared to last quarter, when Q2 2024 pricing grew by 2.2% YOY. Price growth in Minneapolis remained strong - whereas YOY growth in Q2 was already at a stout 11.3%, YOY growth accelerated to 16.3% in Q3. Milwaukee and St. Louis continued their negative YOY growth trends, and in Detroit, while technically positive but ostensibly flat YOY in Q2 (0.2%), growth flipped negative and grew to -3.8% in Q3.

Weekly pricing growth accelerates upward YOY

In terms of pricing on a week-to-week basis, weekly pricing in Chicago during Q3 2024 largely outperformed the equivalent weeks from 2023 by a considerable margin (see green shaded areas). From the week of July 1st through the week of September 30th, weekly pricing in 2024 exceeded the 2023 equivalent by an average of 15.0%. This represents a marked acceleration from Q2, when weekly pricing in 2024 exceeded the 2023 equivalent by an average of 2.3%. Comparing Q4 2024 advertised prices to actualized Q4 prices from 2023, advertised prices, as of this analysis, are approximately 12.8% above where Q4 prices actualized in 2023 – still showing marked growth, albeit decelerating slightly from actualized growth achieved in Q3.

YOY pricing growth achieved with a fundamentally flipped price evolution strategy

The pricing strategy shift, which was very apparent and highlighted in our previous issuance our Chicago newsletter, persisted into Q3. For stays beginning in 3Q 2023, when comparing advertised prices 120 days ahead of a given stay date versus the final price (i.e. price when booking on the stay date itself), prices were an average of 9.3% higher than the final price at the 120-day lead time mark. Comparatively speaking, in Q3 2024, the data flipped entirely, with pricing 120 days ahead of the date of stay equating to an approximate 5.7% discount, on average, relative to final price.

As it is seen in the chart, pricing in Q3 2023 dropped quite precipitously as the stay date neared, whereas in Q3 2024, pricing for the most part increased very gradually. The two pricing evolution curves were observed to sync up around the 3-week lead time mark (where pricing represented an approximate 4.7% discount to final price), and then moved nearly in perfect tandem, in terms of relative discount/premium to final price, until price finalized on the stay date itself.

Advertised hotel pricing for Q4 decreases modestly vs. 90 days ago

Looking forward at advertised pricing for Q4 and into the early part of January, the pricing outlook as of the end of Q3 (i.e. pricing as of September 30th) shows prices having dropped an average of 3.1% compared to forward looking prices for those same dates as of July 1st. Given the strength of the pricing data in Chicago from Q3, perhaps hoteliers back in July felt that the elevated pricing could be maintained through year end but are now softening the prices for Q4 to drive more demand to their properties.

It’s worth pointing out that in terms of day of week price adjustments for the dates in question (October 16th through January 12th), prices for Saturday nights remained ostensibly unchanged (a decrease of 0.1% on average when comparing advertised Saturday night prices as of September 30th vs. July 1st), whereas Sunday night prices declined the most significantly, with Sunday room night prices coming down an average of 4.8%.

Short-term rental supply in Chicago begins upward acceleration again (favoring multi-occupancy units)

From February through July 2024, short-term rental supply in Chicago began to slide, with 4 of the 6 months over that span experiencing negative month-over-month supply growth, resulting in an approximate 1% decrease to the total supply. In August 2024, this trend reversed, with consecutive months of positive month-over-month supply growth of 0.8% and 1.4% in each August and September, respectively. With the 1.4% growth experienced in September, Chicago’s short-term rental supply achieved a new peak of approximately 11,160 units.

As it can be seen in the graphic, the total supply of short-term rental units in Chicago is again beginning to accelerate upward, whereas the supply growth of studio and 1 bedroom units (i.e. those most comparable to a traditional hotel room) has largely halted. The approximate 5,110 units from September 2024 is fewer than the 5,170 of such units from earlier in the year in January 2024, and markedly lower than the studio and 1 bedroom unit supply of 5,800 from January 2019.

Short-term rental ADR growth continues, with market-wide ADR accelerating ahead of studio + 1 bedroom ADR

In the first half of 2024, the total supply of short-term rental units had an approximate average monthly TTM ADR⁽²⁾ premium of 60.3% over the aggregation of studio + 1 bedroom units. When breaking it down into quarters, however, the average monthly TTM ADR premium was approximately 56.3% in Q1 2024, accelerating to 64.3% in Q2. This trend of market-wide ADR accelerating more rapidly than the aggregation of studio + 1 bedroom ADR persisted through Q3, with the market-wide aggregation achieving an average monthly TTM ADR premium of roughly 73.7%. This healthy rate growth is certainly encouraging for owners and operators of short-term rental units, which experienced a 12-month downtrend beginning in December 2022.

Occupancy for studio + 1 bedroom units continues to near-perfectly mirror occupancy for broader short-term rental pool

From April 2022 through February 2024, the aggregation of studio + 1 bedroom short-term rental units in Chicago achieved a modest but relatively consistent occupancy⁽²⁾ premium over market-wide short-term rental occupancy. Beginning in March 2024, the two occupancy curves appeared to sync up and continue in near-perfect tandem ever since (notwithstanding minor, unremarkable deltas for both aggregations across various months). This trend persisted through Q3 2024, with occupancies differing by less than 0.7 percentage points in each July, August and September.

It’s worth mentioning that from June through August 2024, market-wide occupancy and occupancy for the studio + 1 bedroom aggregation differed by less than 0.7 percentage points in each month, and the deltas favored the 0-1 bedroom aggregation in each instance. This flipped in September, when the 0.6 percentage point delta reverted back to the more common pattern of very marginal occupancy premiums favoring the studio + 1 bedroom aggregation.

⁽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