The Hotel Sector’s Super Summer
The hotel sector recorded positive results in its three key performance metrics during August even as guestroom supply continued to grow, sector analysts say.
STR, Hendersonville, Tenn., reported occupancy increased 1.2 percent year-over-year to 71.4 percent and average daily room rates rose 2.3 percent to $130.71. Revenue per available room jumped 3.5 percent to $93.37, STR Senior Vice President of Lodging Insights Jan Freitag said.
“The industry once again set a monthly demand record and achieved its highest August occupancy level since 2014,” Freitag said. “Those numbers indicate a strong finish to the summer with a decent mix from both the leisure and business sectors.”
Marcus & Millichap, Calabasas, Calif., said rising business and consumer confidence and strong travel expectations this year are keeping hotel occupancy at record levels and supporting broad-based revenue growth. “Many travelers are increasingly visiting smaller markets, boding well for occupancy improvements in areas outside marquee travel destinations,” the firm’s third quarter National Hospitality Report said. “A strong summer travel season will reinforce occupancy growth through year end, particularly as many individuals opt to travel domestically.”
Freitag noted hotel ADR growth remained below the long-term average during August. “Pricing power remains a key topic around the industry as inflation-adjusted ADR has been mostly flat,” he said. But U.S. hotels have now posted 102 consecutive months of year-over-year RevPAR growth and STR forecasts continued RevPAR growth through 2019.
Looking ahead, CBRE Hotels, Atlanta, said new hotel rooms coming online should not present a major problem for the sector because demand will continue to exceed new-supply levels through 2019. The firm predicted hotel room supply will peak at a 2.0 percent gain this year before stabilizing at the 1.9 percent long-run average for the next two years. Further, the number of projects entering all phases of the development pipeline is declining.
“On a broad national basis, the supply increases have been surpassed by lodging accommodation demand growth for the past eight years and this trend is forecast to continue through 2019,” CBRE Hotels Senior Managing Director R. Mark Woodworth said.
Woodworth noted the strong correlation between the economy’s health and the lodging industry’s performance. “In fact, it is the positive outlook for the nation’s economy in 2019 that explains our baseline forecast for continued growth in U.S. lodging demand,” he said.
