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The U.S. hotel industry reported increases in all three key performance metrics in 2011, according to data from STR.
Overall, the U.S. hotel industry's occupancy rose 4.4 percent to 60.1 percent, its average daily rate was up 3.7 percent to US$101.64 and its revenue per available room increased 8.2 percent to US$61.06. 2011 was the first time since 2008 that the industry ended the year with occupancy of more than 60 percent and an ADR of more than US$100. The industry reported a 0.6-percent increase in supply in 2011 and a 5.0-percent demand increase for the year. Demand has increased 5.0 percent or more only three times since 1987. "2011 was a strong year for the U.S. hotel industry," said Randy Smith, co-founder and chairman at STR. "Room-supply growth continued to drift downward as room demand reached record levels during the year. Though occupancy and ADR were still below 2007 and 2008 levels, it was still encouraging to see the industry experience a solid rebound during a period of considerable economic difficulties." "In 2012 the hotel industry will face tough year-over-year comparisons, though we are still optimistic," Smith continued. "With modest gains in occupancy and stronger increases in room rates, we expect RevPAR to increase about 4.3 percent in 2012." Among the Top 25 Markets, Detroit, Michigan, ended the year with the largest occupancy increase, up 10.2 percent to 59.8 percent, followed by Tampa-St. Petersburg, Florida, with a 9.7-percent increase to 60.5 percent. New Orleans, Louisiana, ended the year virtually flat with a 0.4-percent decrease to 64.2 percent. Two markets ended the year with double-digit ADR increases: San Francisco/San Mateo, California (+13.9 percent to US$155.14), and Oahu Island, Hawaii (+10.0 percent to US$165.05). Atlanta, Georgia (-0.4 percent to US$82.58), and Norfolk-Virginia Beach, Virginia (-0.3 percent to US$84.24) were the only top markets to report ADR decreases in 2011. San Francisco/San Mateo achieved the largest RevPAR increase, rising 19.7 percent to US$122.54, followed by Nashville (+14.8 percent to US$58.01) and Miami-Hialeah (+14.1 percent to US$115.65). None of the top markets reported RevPAR decreases for the year.
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Hospitality market fundamentals look set to continue the recovery which started in 2011 in spite of continuing uncertainty and the prospect of further upheaval in the global and regional economies according to Ernst & Young's latest Global Hospitality Insights report published today.
Despite the uncertain global economic environment, hospitality indicators continue to appear positive. "The conventional wisdom suggests that key fundamentals should be on the wane, but that has not happened yet and, due to many factors, we don't believe it will occur in 2012," said Michael Fishbin, Ernst & Young's leader of Global Hospitality Services. Nevertheless, Fishbin suggests hotel operators and investors in the sector need to stay focused and not have a false sense of security by the overall numbers. "The situation for the hotel industry is markedly different from market to market and global operators need to be on their toes and ready to react to rapidly changing conditions," he added. Fishbin contrasted hospitality markets in developed economies, such as the US, with some developing economies such as China and Brazil, where construction has been very active. In the US, currently the largest hotel market in the world, the construction of new hotels has historically averaged around two percent per year but in recent years, and for the foreseeable future, is projected to be less than one percent per year. "Even with the uncertain economic outlook, hotel supply is not going to outpace demand any time soon, giving fundamentals such as room rates and overall occupancy a chance to further recover," Fishbin said. Among emerging economies, Brazil could fare the best over the next decade in part by the impact of two mega events -- the FIFA Soccer World Cup and the Summer Olympics -- scheduled to take place there in 2014 and 2016, respectively. These events will attract millions of travelers to the country and while hotel construction has been increasing in preparation for both events, officials are taking a pragmatic approach in order to avoid overbuilding. Fishbin concludes that while the bias among hotel companies will be to continue to grow in 2012, that growth should not come without a fair amount of checking back in the rear view mirror. "This isn't a time for hotel operators to abandon the principles that allowed them to navigate through the recent economic downturn," he says. Many companies are still sitting on piles of cash waiting for an opportunity to transact, says Fishbin. "Companies should take advantage of this breathing room to reassess and examine their capital agendas to make sure they are using cash wisely and efficiently as well as preparing for future growth," he says. |
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