U.S. Hospitality Industry Firing on All Cylinders

Fairfield Inn & Suites, 651 W Areba Ave., Hershey, PA 17033(Adapted by David Hogg from a 4/24/15 article by Jan Freitag, Senior VP, Strategic Development, STR, in Hotel News Now)

The first quarter of 2015 finally brought what was expected for a while now: The 12-month-moving-average occupancy tied an all-time record of 64.9%, on par with the fall 1995. This means all key performance indicators (rooms available, sold, revenue, average daily rate, occupancy and revenue per available room) are now at all-time highs.

The dollar amounts are not inflation adjusted, but the industry is firing on all cylinders. I would expect more record breaking demand and revenue numbers for the foreseeable future. (All data is from STR, the parent company of Hotel News Now.)

1. More rooms sold this month than any March ever
Occupancy was the highest ever recorded in March (66.8%). The industry sold more than 100 million roomnights (another March record), which was 3.3 million room nights more than last year.

Compared to March 2007, the industry recorded 12 million more rooms sold. In short: Demand is strong, and the hotel industry is capitalizing on the healthy macroeconomic picture.

2. Average Daily Rate continues to accelerate
March 2015 results were slightly negatively affected by one less Saturday than in March 2014. Despite this, RevPAR grew a healthy 7.4%, driven by ADR growth of 5%.*

This is the second consecutive month in which ADR growth has accelerated over the previous month (January: +4.4%, February: +4.7%, March: +5%). It will be interesting to see if operators can continue this pace as we get into the spring meeting season.

RevPAR has now increased for 61 consecutive months (or five-plus years) with no end in sight.

3. Is sustained supply growth finally here?
Supply growth hit 1.1% in March. This is the second consecutive month that year-over-year number has increased 0.1%.

It will be interesting to see if we revise this number down next month or if this is indeed the long-awaited impact of the under-construction rooms opening up. If so, brace yourself for impacts on occupancy growth and eventually impacts on absolute occupancy in middle to late 2015.

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