STR predicts lodging trends for 2017 and shares data on current health of the global hospitality industry
Canvassing data from 175 countries, leading hotel data provider STR forecasts a positive revenue per available room (RevPAR) for 2017 and a lodging landscape that will continue to incorporate alternative accommodations for the near future.
STR’s trend predictions occurred at the HX: The Hotel Experience 2016 conference held in New York last month, where STR’s Lindsay Culbreath, senior director of business development and marketing led a discussion on lodging industry trends for the upcoming year and shared statistical data on how the hotel industry is currently fairing in the United States and beyond.
Room occupancy, at 67.1 % has never been higher for the 54, 000 U.S. hotels here, an occupancy that’s remained unchanged since last year, said Culbreath. With average daily rate (ADR) at $124.53, a 3.2 percent increase since September of 2015, this brought RevPAR to $83.57, also an increase of 3.2 percent. Total room revenue for the past year was up 4.8 percent, at $72.5 billion.
The pace of demand growth of hotel rooms has slowed over the past 12 months, said Culbreath, yet, there is also a positive increase in supply growth or the total number of rooms here, with a 1.5 percent increase.
Since October of last year, there have been two million more rooms available each month, according to STR’s analysis, and occupancy growth is getting close to 0, said Culbreath. “There are more rooms to sell than there were last year, but this scenario is not unprecedented,” she said. “From January of 1990 through December of 1999, the industry saw a similar decline in occupancy at the same rate growth for the same time period.”
Following six years of growth, RevPAR is decelerating, yet STR is optimistic for its continued growth, says Culbreath.
Between 2000 to 2015, hotel revenue has risen from $106.2 billion to $189.5 billion, according to the group’s data, edging house profits (total profits), up from $41.4 billion to $73 billion in the same period. In fact, most U.S. markets experienced house profit in 2015 compared with 2014, except, “Those that saw a decline were in oil markets,” said Culbreath. “There were 134 U.S. markets out of 164 that saw house profit in 2015. While revenue and profit growth levels were lower in 2015 than 2014, they remained strong at 11.2 percent.”
In this part of the measured cycle, according to Culbreath, “Independent hotels are outperforming brands. For example, in the independent space, ADR percent of change was 3.8 percent change over the past year, compared with the luxury market at 1.6.
“High end hotels are still busy, but a little less so,” said Culbreath, referencing the decrease in occupancy by scale going from 76.2 percent (actual occupancies) in 2015 to 75.9 percent in 2016 (year-to-date through September).
Examining group compared with transient performance, there were 1.1 % and 2.1 % increases respectively. Despite high occupancy levels, transient ADR growth has been slow, said Culbreath.
However, “Both transient and group ADR continues to climb,” said Culbreath, with Transient ADR up from $191 in 2007 to $215 in 2016. Group ADR rose from $165 to $190 during that same period.
In the group meeting space, those with attendees of 1,000 or more are on the rise, according to Culbreath. From 2013 to 2015, there was a spike upwards from 32 to 37 percent, compared with meetings of 300 attendees or less, for which there was a decrease from 30 to 28 percent.
Almost half of the top 25 U.S. hotel markets have experienced a decline in occupancy rates, according to Culbreath, with Houston incurring the largest decrease at just over 8 percent, followed by the cities of Boston and Denver.
The ADR percent change for the New York, Houston and Miami markets also took a downward turn this past year, with decreases at 3.1, 2.6 and 1.9 percent, respectively.
Since Brexit, or Britian’s withdrawal from the European Union (EU), the top three U.S. cities with the greatest exposure to the United Kingdom and therefore possible impact from the news are Orlando, with a 15.8 percent of international visitors, Tampa/St. Petersburg, with 13.8 %, and Washington, D.C., with 13.3%. Alternatively, markets with the least exposure included Honolulu, San Antonio, and El Paso, with 1.0, 0.8, and 0.3 percent of international travelers, respectively.
According to a study STR conducted of Airbnb of its markets in Boston, Los Angeles, Miami, New Orleans, San Francisco, Seattle, Washington D.C. Abroad, Barcelona, London, Mexico City, Paris, Sydney and Tokyo, the global homestay network has expanded to lead all lodging companies worldwide, encompassing 2.3 million rooms globally, while Marriott, Hilton and IHG followed behind with 1.1 million, 769,000, and 716,000 rooms for the thirteen markets studied, respectively.
Covering months moving average (MMA) July, 2016 in full markets, including Los Angeles, Tokyo and San Francisco, Airbnb had the highest occupancy rates at 46.2 %, 53.6%, and 84.6% respectively over the past year. That said, overall, hotel rate growth was stronger in almost all markets here, including Los Angeles at 8.6%, San Francisco at 6.1% and Seattle at 4.0%.
On compression nights, (95% occupancy or higher in a market), premiums appear to remain at a record high, said Culbreath. Examining a combination of 7 U.S. markets examining year-to-date July, 2016, there were 71 compression nights at an average 35% higher rate premium.
Examining U.S. development, in-construction rooms are up 35 percent, according to STR data, with over 170,000 rooms in the pipeline now compared to 130,000 last year. Upscale and upper midscale construction has remained the strongest for the past two years at a combined 66 percent.
Looking towards future total U.S. growth, STR expects supply to rise by 2 percent in 2017, with demand at 1.5 percent.