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

Hotel pricing in Q3 shows evidence of a (potential) trend reversal

Starting in the back half of 2023, hotel pricing⁽¹⁾ in Denver started experiencing the price softening that the broader US hotel industry had been experiencing since Q2 2023. This trend persisted through the first half of 2024, with the TTM pricing curve broadly continuing its downward slope through July 2024. In August, however, TTM pricing grew month-over-month by 0.6% compared to July, the largest month-over-month growth rate since September of last year. Pricing in September did revert back to the negative trend (with TTM September pricing declining by -0.7% compared to TTM August), but it will be worth monitoring in Q4 to observe if there are any additional month-over-month increases in TTM pricing.

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 price growth 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%.

Pricing in Denver and Colorado Springs continue to move in opposite directions

Consistent with the TTM pricing curve for Denver’s hotel market, comparing prices from Q3 2023 to Q3 2024 similarly shows pricing declines of -4.2% year-over-year. Conversely, pricing in other major regional cities including Albuquerque and Colorado Springs show price appreciation, with pricing in Colorado Springs coming in particularly strong at 6.3% growth YOY in Q3 2024. Santa Fe and Phoenix, which both experienced YOY pricing declines when comparing H1 2023 to H1 2024, rebounded in Q3 with YOY pricing growth of 1.8% and 1.7%, respectively.

Weeks with YOY pricing growth are eclipsed by weeks with much more dramatic YOY declines

Despite Denver’s YOY decline in hotel pricing in 3Q 2024, when examining the data on a weekly basis, there were actually multiple weeks where 2024 pricing surpassed the 2023 equivalent week. Across the 14 weeks spanning the week of July 1st through the week of September 30th, pricing for 2024 was greater than the 2023 equivalent week in 6 weeks - nearly half of the weeks in question. The reason for the fairly significant YOY pricing decline in Q3 was that, in examining the 6 weeks where there was YOY pricing growth, price grew by 6.5% on average. Conversely, in examining the 8 weeks where there was YOY pricing decline, prices decreased by 11.4% on average.

Q3 price evolution curve demonstrates similar pricing strategies compared to Q2

Similar to what Denver experienced in Q2 2024, pricing in Q3 2024 exhibited a similarly shaped pricing evolution curve, with pricing 120-days ahead of a given stay date beginning at a premium relative to final price (i.e. the lowest rate bookable on the stay date itself), which then gradually ramped downward to a discount (compared to final price) in the middle of the curve, and then steeply ramped up towards the final price about a week before the stay date.

While the Q2 and Q3 price evolution curves in 2024 demonstrate a clear shift from the equivalent curves from 2023 (when pricing at the 120-day lead time mark began and largely remained at a discount relative to final price), there was one key difference between the Q2 and Q3 curves in 2024. In Q2, the premiums and discounts over the course of the curve were more dramatic, with the 120-day lead time premium starting at 4.3%, and the curve’s nadir reaching as low as a -4.8% discount relative to final price. Comparatively in Q3, the maximum premium and discount reached were less significant, starting at a 120-day lead time premium of 1.9% and reaching a discount nadir of -4.2%.

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

Consistent with the price evolution curves we’ve observed in both Q2 and Q3, pricing for Q4 2024 and early January 2025 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 5.4% lower than prices for those same dates as of July 1st. From a day-of-week perspective, Thursday night pricing was the most heavily impacted, with Thursday night prices declining by an average of 7.1% over the aforementioned time period. Tuesday nights were the least impacted, with Tuesday night prices coming down by a modest 3.3% since the July 1st pricing outlook.

Short-term rental supply continues to grow and reach new peaks

It was noted in our previous issuance of this newsletter that the June 2024 supply of studio + 1 bedroom short-term rental units (i.e. those most comparable to a traditional hotel room) still remained below January 2019 levels.  In September, however, as the supply curves continued to show upward growth, Denver’s supply of studio + 1 bedroom short-term rental units reached a new peak of approximately 2,770 units, surpassing January 2019’s count of approximately 2,750 units.  This new peak came after two consecutive months of month-over-month supply declines in each July and August 2024, followed by 2.1% month-over-month supply growth in August.  While total short-term rental supply was indeed positive in each July and August 2024 (approximately 0.1% and 0.4%, respectively), similar to 0-1 bedroom supply, total supply similarly accelerated upward in August, with approximately 1.6% month-over-month supply growth.

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 average monthly TTM ADR⁽²⁾ premium of approximately 47.1% over the aggregation of studio + 1 bedroom units. When breaking it down into quarters, however, the average monthly TTM ADR premium was approximately 39.2% in Q1 2024, accelerating to 55.6% in Q2. This trend of market-wide ADR accelerating more rapidly than studio + 1 bedroom ADR persisted through Q3, with the total market aggregation achieving an average monthly TTM ADR premium of roughly 60.2% ahead of studio + 1 bedroom units. This healthy rate growth is certainly encouraging for owners and operators of short-term rental units, who contended with 9 consecutive months of decline in TTM ADR beginning in February 2023.

Occupancy for studio + 1 bedroom units continues to mimic market-wide occupancy for short-term rentals

From August 2021 through July 2023, the pool of studio + 1 bedroom short-term rental units in Denver achieved a modest but relatively consistent occupancy⁽²⁾ premium over market-wide short-term rental occupancy. Beginning in September 2023, the two occupancy curves appeared to sync up and continue in near-perfect tandem ever since (notwithstanding minor, unremarkable deltas, usually in favor of the studio + 1 bedroom aggregation). This trend persisted through Q3, with occupancies differing by less than 1 percentage point in each July, August and September.

It’s worth mentioning that from January through June of 2024, market-wide occupancies and occupancies for the studio + 1 bedroom unit aggregation differed by less than 1 percentage point in each month, but the deltas always favored the studio + 1 bedroom aggregation. The data flipped briefly in July, when the 0.5 percentage point delta favored the market-wide aggregation, but then reverted back in August to the typical pattern of 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