Hotel Performance Falls Below Predictions

The U.S. hotel industry saw positive but below expected first quarter results, reported STR, Hendersonville, Tenn.

Hotel occupancy rose 0.4 percent to 61.8 percent year-over-year, average daily rates increased 1.1 percent to $129.02 and revenue per available room grew 1.5 percent to $79.68 between January and March.

But that performance fell below analysts expectations, particularly the RevPAR figure, which saw its lowest percentage change for an opening quarter since 2010, said STR Senior Vice President of Operations Bobby Bowers. “What made the quarter even more underwhelming was the fact that year-over-year results received a lift from the Easter calendar shift as well as significant group performance gains in San Francisco, which is benefitting from an influx of business at the reopened Moscone Center.”

STR Senior Vice President of Lodging Insights Jan Freitag called last month probably the industry’s worst March since the recession. He noted March’s 0.6 percent ADR increase was the lowest for any month in nearly nine years, “which indicates that pricing confidence may have not yet reached its floor,” he said. “On the plus side, we continue to break monthly demand records, which is keeping overall performance in the black. The challenge of course is maintaining profit margin during a time of rising labor costs.”

The hotel sector has now posted year-over-year RevPAR growth for 108 of the past 109 months. The longest overall expansion cycle in industry history lasted 112 months, ending in March 2001.

“On the whole, the top markets continue to underperform the rest of the country in year-over-year growth,” Freitag said. “New inventory entering those major cities is pulling occupancy levels down and further affecting hotelier pricing confidence.”

TravelClick Senior Industry Analyst John Hach noted signs that hotel bookings are stabilizing across many North American markets. For example, group travel bookings rose 4 percent in the first quarter. “[But] it will be more important than ever to monitor ADR closely to track whether or not growth is able to persist in the coming months,” he said.