Demand in the U.S. hotel industry grew 4.8% during August, exceeding July’s 4.7% growth

Highlights:
• August demand growth (+4.8%) was higher than July’s (+4.7%).
• RevPAR increased 9.4%, the second-highest growth rate this year.

From an October 6, 2014 article By Jan Freitag in Hotel News Now (jan@str.com)
The United States hotel industry is in full swing. Here are five things to know about August data from STR, parent company of Hotel News Now.

1. August demand growth higher than July’s

Year-over-year demand growth in August of 4.8% was the second highest this year (after May’s +5.7%) and the second strongest since mid-2011.

What I think is even more remarkable is that the August year-over-year growth was higher than July’s (+4.7%). I keep saying that eventually the growth rates of demand have to slow down because the absolute values are now so high (110 million rooms sold, 5 million more than last August), but turns out I am wrong. (So far. Eventually I will be right.)

The absolute number of roomnights sold during August was less than July, however, prompted in part by a decline in group meeting attendance. In August, we sold 2.8 million roomnights fewer than in July.

2. August saw second-highest RevPAR growth this year

Revenue per available room increased 9.4%, also the second-highest year-over-year growth rate this year (behind May’s +10%) and the second highest since September 2011 (+10%).

RevPAR was driven by average-daily-rate growth (+5.4%) and occupancy growth (+3.8%). Just as we observed for the past 46 months, RevPAR growth is disproportionately driven by ADR, which in turn will drive profit growth.

3. ADR growth highest reported in this recovery cycle

In addition to the highest-reported year-over-year ADR growth (+5.4%) reported in this recovery, it is also the highest since January 2008 (+6.3%) prior to the downturn.

Is this a sign that our clients are finally taking the absolute occupancy levels of more than 65% during the last six months as a sign that the recovery is officially here? Are they finally pricing their product according to scarcity? Or is this just a blip and hoteliers will retreat back to sub-4% ADR growth this fall?

Time will tell. It’s remarkable that in the prior four years, between 2009 and 2013, ADR always declined from July to August—not by much, but it did. This year, the August ADR is actually higher than July (+$0.62) which last happened at the peak of the market, in 2008 and 2007—and prior to that in the mid and late ‘90s. So, I take this as another positive indicator of pricing power.

4. Supply increased 1%

After a remarkable 44-month long string of supply growth rates below 1% in August, we finally reported a supply increase of 1%.

Well, OK, the actual number was +0.95256356%, but you can see that the “no-supply Kool-Aid” that has fueled this party is slowly running out. Between August this and last year, our census team tracked openings of 433 hotels with 46,800 rooms, for a total annual supply increase of 1.5 million roomnights. As long as we keep selling more roomnights than that, all is well. And it stands to reason that for the foreseeable future all will be well.

(Clipped to blog length by Dave Hogg)

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