Hotels Returns Mostly Positive

The hotel sector reported mostly positive metrics but decreased occupancy during the second quarter, STR and CBRE Hotels reported.

STR, Hendersonville, Tenn., said hotels saw occupancy slip 10 basis points in a year-over-year comparison with 2018 to 70 percent.

“Despite that slight year-over-year decrease, the absolute occupancy level was the second-highest among all second quarters in our historical database,” said STR Senior Director of Consulting and Analytics Alison Hoyt. “The industry sold more nights than any other second quarter in history, but supply grew at a bit of a higher rate.”

CBRE Hotels, Atlanta, said hotel demand grew 1.9 percent nationally during the quarter, 0.5 percent slower than in the first quarter. Supply growth remained steady at 2.0 percent. Just under half the markets CBRE Hotels tracks–29 of 60–had supply gains exceeding 2 percent between April and June, three fewer than in the first quarter. Half the markets tracked showed occupancy declines, one more than in early 2019.

Other than the occupancy dip the sector’s story nearly mirrored the first quarter, Hoyt said. “Occupancy levels were mostly flat, and a lack of pricing confidence meant an uninspiring RevPAR growth rate,” she said. “We’re still in an expansion cycle, but with continued expense growth, specifically in labor departments, profitability is of significant concern in a lot of markets.”

The average daily rate climbed 1.2 percent during the quarter to $133 and revenue per available room increased 1.1 percent to $93.17, STR reported. Overall, 14 of the 25 largest U.S. markets saw a RevPAR increase.

The hotel sector has grown in 110 of the last 112 months, with only two minor year-over-year decreases in September 2018 and June 2019, STR said. The longest overall expansion cycle in industry history lasted 112 months (with 111 increases) between 1991 and 2001.

STR Senior Vice President of Lodging Insights Jan Freitag noted the firm’s latest forecast predicts 2.0 percent RevPAR growth for full-year 2019 and 1.9 percent growth in 2020. “Of course with labor continuing to grow at a faster pace than revenue, there is not much good news for profit margins,” he said.