Hotels See Steady Rates, Inconsistent Bookings

Heading into the high-traffic summer months, hotels continue to experience stable average daily rates but decreasing bookings, reported TravelClick, New York.

“North American hoteliers are still dealing with dips in occupancy across the board,” said TravelClick Senior Industry Analyst John Hach, noting that bookings fell 70 basis points for all travel segments in the second quarter. “Future booking trends indicate that the inconsistency will likely continue throughout the upcoming summer travel season.”

This marks an ongoing trend from earlier in the year, TravelClick said. Business travel average daily room rates increased 1.9 percent in the second quarter while bookings fell 2.5 percent. Similarly, ADR for the group segment increased 0.9 percent, but occupancy fell 3.5 percent.

The leisure travel segment continues to hold strong, with gains in both ADR and bookings–up 1.0 percent and 3.2 percent, respectively–TravelClick reported.

As a result, the hotel sector returned “mixed” results in its three key performance metrics during April. STR, Hendersonville, Tenn., said that hotel occupancy fell 0.7 percent compared to a year before to 67.5 percent, average daily rates grew 2.4 percent to $126 and revenue per available room rose 1.7 percent to $85.

“[In April] we saw the opposite of the previous month with performance negatively affected by the Easter calendar shift,” said STR Senior Vice President of Lodging Insights Jan Freitag. “Group occupancy in particular was down 12.5 percent year-over-year as meeting planners avoided the time around the holiday.”

But even with group occupancy sliding and supply growth continuing at nearly 2 percent, “the absolute occupancy level was the second-highest for any April on record,” Freitag said.

Freitag noted that hotel performance exceeded expectations in April by continuing the industry’s run of consecutive months showing year-over-year RevPAR growth. “That streak is now 86 straight months,” he said.

Robert Mandelbaum, Director of Research Information Services with CBRE Hotels’ Americas Research, Atlanta, noted that the competitive market conditions that face the hotel sector have been well documented. “Clearly facing tough market conditions, stagnant or declining occupancy levels and low ADR growth, U.S. hotel operators reacted by controlling their expenses,” he said.

Mandelbaum said hotel revenue growth continued to slow in 2016. Total operating revenue increased just 2.4 percent during the year, the lowest annual growth rate seen since the Great Recession in 2009. “Fortunately, hotel operators responded by limiting expense growth to just 1.6 percent,” he said, noting that hotel operators benefitted from low inflation as well as lower food and utility prices.

“However, as revenues continue to rise, so do the costs for related expenses like credit card commissions and management and franchise fees,” Mandelbaum said. He noted a sizeable 6.8 percent increase in commissions paid to intermediaries including travel agents and online travel agencies such as Travelocity and “This is consistent with what we hear from our clients,” he said.