U.S. Hotel Revenues Grow; Pipeline Shrinks

May 17, 2018

U.S. hotel industry revenue topped $208 billion in 2017, up $10 billion from 2016, said STR, Hendersonville, Tenn.

The total revenue figure and a total industry-wide house profit of $77 billion represent new highs for the industry, said STR Director of Financial Performance Joseph Rael. But he noted revenue and profit growth were both much lower last year than in 2015. House profit increased 4 percent last year compared with 11-plus percent in 2015. Total revenues increased 4.5 percent in 2017 after rising 8.1 percent in 2015.

“The industry reached a milestone by exceeding $200 billion in total revenue last year,” Rael said. “However, while revenue is still growing, expenses grew at a higher rate for the second year in a row. As a result, profit margins have declined somewhat.”

STR analyzed same-store growth rates for 5,200 U.S. hotels. It found gross operating profits increased 1.0 percent on 1.9 percent revenue growth. Full-service hotels grew house profit 1.4 percent while limited-service properties saw a 0.2 percent decline last year compared to 2016. Among the class segments, luxury hotels achieved the greatest profit increase at 3.1 percent while upscale and upper-midscale properties both reported a 0.3 percent profit decline.

U.S. hotel room construction has slipped as profit margins decline. STR said the hotel pipeline fell 2.2 percent last month compared with April 2017.

“The number of hotel rooms under construction in the U.S. has now declined in six of the last seven months,” STR said. December’s 3.7 percent contraction was the largest year-over-year room construction decrease in the U.S. since September 2011’s 7.8 percent drop.

Lodging Econometrics, Portsmouth, N.H., said the markets with the largest hotel construction pipelines include New York (169 projects/29,641 rooms under construction), Dallas (159 projects/19,149 rooms), Houston (148 projects/16,158 rooms), Nashville (119 projects/15,992 rooms) and Los Angeles with 115 projects/17,155 rooms in its pipeline.

Lodging Econometrics reported 2,297 projects totaling 272,459 rooms scheduled to start construction in the next 12 months, representing a 5 percent drop by projects year-over-year. But projects in the early planning stage increased 23 percent year-over-year (by project) to 1,366 projects with 158,366 rooms.