Home > News > Latest News > Strong demand keeps US hotel p.....
Customer Comment
  • Marriott
    Order has been delivered very quickly and item has a good quality
  • Hilton
    Good,high quality,big and beautiful box tissue.thank you!
  • InterContinental
    Good quality and lovely item*Fast delivery*Reliable Seller*Def recommend
  • Shangri-la
    Very Good product.well packaged for shipment.fast delivery.thank you !
Contact us
Shenzhen NJC Hotel Guestroom Supplies Design And Development Co.,Ltd
Address: Floor 4, Bldg. 27, Xin'e Ind. Zone, Egongling Community, Pinghu Street, Longgang Dist., Shenzhen, Guangdong, China (Mainland)
Contact Now


Strong demand keeps US hotel performance growing

  • Author:Stephanie Ricca
  • Source:hotelnewsnow.com
  • Release on:2017-08-12

Strong demand keeps US hotel performance growing

NASHVILLE, Tennessee—There’s not much to be worried about when it comes to the U.S. hotel industry’s growth, unless it’s the slower-than-anticipated average-daily-rate growth.

That was the prevailing sentiment of general session speakers at the opening day of the Hotel Data Conference here in Nashville. As Elizabeth Winkle, chief strategy officer of STR—parent company of Hotel News Now—put it during her industry overview: “The industry continues to expand, albeit slowly. We must remember that the smallest rate of growth is still growth.”

She cited the fact that “all six key performance indicators are record-setting.”

On a twelve-month moving average, STR in June 2017 recorded:

room supply up 1.7% to 1.9 billion rooms;
room demand up 2.2% to 1.2 billion rooms;
occupancy up 0.5% to 65.6%;
average daily rate up 2.7% to $125.50;
revenue per available room up 3.2% to $82.38; and
room revenue up 4.9% to $152.5 billion.

However, all the general session speakers on Thursday noted that raising rate to match the high demand numbers continues to be somewhat elusive across the board in the industry.

“We are approaching a tipping point; occupancy is under pressure from supply growth or capacity constraints,” Winkle said. “If we lose occupancy do we also lose rate? … Given the all-time highs we see … we still struggle to yield meaningful rate. When the industry’s growth is resting on ADR growth, we have higher expectations for the measure, and we need it to perform.”

STR President and CEO Amanda Hite shared the company’s revised forecast for the remainder of 2017, and supply did factor in to some of the changes, she said.

“There’s good news and bad news,” Hite said. “Good news is demand was stronger than we expected, so we revised that up to 2% from 1.7% (growth for 2017). But on the rate side, it’s a revision down. We really felt like the fundamentals are there for pricing power, but we haven’t seen it play out in the first half.”

In June, STR forecast ADR would grow 2.5% in 2017, and now it forecasts that will be 2.3% growth.

STR revised its occupancy forecast for 2017 up from its June forecast. In June, the company forecast occupancy loss of -0.3%, and now it’s raised that to flat for the year. That number more than offsets the new ADR forecast, resulting in RevPAR forecast going up, from 2.2% growth forecast in June for the year, to 2.3% growth forecast now.
Mark Woodworth, senior managing director of CBRE Hotels’ Americas Research, also adjusted his firm’s 2017 forecast, predicting 2017 ADR at 2.5% growth for the year and RevPAR at 2.8% growth.

“For our forecast for 2017 to come true, what does the back half of the year need to look like?” he asked. “Third quarter is looking pretty soft, so for those annual numbers to hit, … industrywide occupancy would have to be flat and ADR would have to grow. We see supply and demand in balance for the rest of the year.”

Gerry Chase, president and COO of New Castle Hotels and Resorts, provided some color during the general session from a hotel owner and operator’s perspective, and said his company has seen examples of everything characterizing today’s U.S. hotel industry climate, from supply worries to continued great demand.

“We look at markets from population growth perspectives and commerce growth perspectives,” he said. “We’ve seen supply growth in some markets that has been challenging, like Syracuse, New York. Portland, Maine, also has a lot of supply growth, but the market has absorbed it.”

At the end of the day, he said, “I’d rather be in a market right now with a lot of cranes in it, over a market that doesn’t have that.”

Hite echoed some of those oversupply worries, but tempered them.

“We’re not going to build ourselves into a downturn; we never have before,” she said. “But for an operator, it’s a lot easier when there isn’t a new hotel being built next door.”

What supply looks like
Winkle said new supply in the top 25 markets in the U.S. continue to be a story.

“We knew 2017 would be the year of supply,” she said. “We knew what to expect and we are seeing that play out.”

While in general, high demand numbers still outpace supply, Winkle pointed out a couple potential problem spots when it comes to supply, namely the upscale chain-scale segment, which in June showed 5.9% supply growth on a 12-month moving average, higher than the 5.2% demand growth in that segment.

U.S. markets to watch from a supply perspective include Denver and Nashville—both with 3.6% growth as of June year to date—New York City (4.2%); Miami/Hialeah, Florida (4.7%); Minneapolis/St. Paul (4.9%); Oahu Island, Hawaii (5.3%); and Houston (5.6%).

Where’s the pricing power?
Winkle mentioned three big opportunities for pricing power, according to the data:

Transient pricing: “Transient share is growing in every top 25 market and that shift is greater than 5% in 20 markets,” she said. “However, transient ADR premium is declining in all but six markets.”

Compression nights: “They’re still growing and the last five years have been standout years,” she said. “We have more opportunities now than we have in the past for compression. While we’re seeing the number of compression nights grow, we’re seeing the premium dropping.”

Changes in industry composition: “We’re seeing both supply and demand share shift into higher rate tiers,” she said. “The expectation is we could realize stronger rate growth.”

Chase mentioned that the changing face of group business—small groups that are booking much closer to their event dates—might have an impact on operators’ confidence in pushing rate.

The economic perspective
Adam Sacks, president of Tourism Economics, looked at all the hotel performance data against a larger economic backdrop during Thursday’s general session, sharing some possible risks that might derail the good industry outlook, as well as offering some explanations behind some of it.

He pointed to the trend coming out of the Great Recession where U.S. hotel room demand began to outpace gross domestic product.

“What’s underlying this is a behavioral shift,” he said. “Over the long run, people have been generally consuming more hotel rooms over time.”

Now, that demand is even higher than ever before, and Sacks said it will continue to outpace GDP, which is forecast to grow 2.2% this year.

“U.S. consumer markets and corporate markets are both on pretty solid footing. We don’t see anything in leading indicators or fundamental issues with the U.S. economy or interest rates that would cause us to be concerned about a recession in the near-term horizon,” he said. “Consumer confidence is leading the way, and businesses are starting to invest. This is a real turn from what we saw a year-and-a-half ago.”

Sacks addressed the fact that despite these positive trends, hotel industry growth—while positive—is relatively muted still, and he offered three reasons why:

“Income growth has been very weak,” he said. “Consumer spending … has been outpacing income growth, and it means the savings rate is going down.” “Wages have been stubborn in their willingness to grow,” he said. “The Fed will be reluctant to raise interest rates.” “The strength of the dollar is contributing, too,” he said. At the end of the day, Sacks said there’s “nothing to be alarmed at” when looking at the overall economic picture and how it relates to hotel performance, though the lingering uncertainties surrounding policy decisions made by the current Donald Trump administration remain a concern.

“The U.S economy is on relatively good footing,” he said. “The greatest uncertainty indeed is on the policy front.”