Hotel Sector Sees Mixed 3Q Performance

Michael Tucker mtucker@mba.org

October 25, 2018


The U.S. hotel sector saw mixed year-over-year performance during the third quarter and full-year 2017 performance fell short of expectations, analysts said.

STR, Hendersonville, Tenn. said hotel occupancy slipped 0.4 percent compared with third-quarter 2017 to 71 percent. Average daily room rates rose 2.1 percent to $131.86 and revenue per available room grew 1.7 percent to $93.65. Demand as measured by room nights sold grew 1.6 percent year-over-year, while the supply of room nights available increased 2.0 percent for the third consecutive quarter, STR said.

"Because of the comparison with the post-hurricane demand period of 2017, September broke the industry's 102-month stretch of consecutive RevPAR increases and ultimately pulled down growth for the quarter as a whole," said STR Senior Vice President of Operations Bobby Bowers.

Bowers noted the 1.7 percent RevPAR increase was the lowest for a third quarter since the current growth cycle started in 2010. "Regardless, growth is growth, and overall industry performance remains in good shape with our forecast calling for growth through at least 2019," he said.

STR said Phoenix experienced the largest occupancy and RevPAR increases, with a 4.8 percent year-over-year occupancy rate increase to 61.1 percent and a 9.3 percent RevPAR jump to $57.55. San Francisco/San Mateo, Calif. posted the highest ADR lift, up 8.3 percent to $257.03.

Overall, 18 of the 25 largest markets registered a RevPAR increase compared to a year ago, STR said. Houston saw the quarter's steepest declines in all three key performance metrics as occupancy fell 11.2 percent to 59.8 percent, ADR slipped 2.1 percent to $100.30 and RevPAR dropped 13.1 percent to $59.94.

In absolute values, New York ranked first in occupancy (89.8 percent), ADR ($261.92) and RevPAR ($235.21), STR reported.

CBRE Hotels, Atlanta, said U.S. lodging sector performance fell short of expectations for full-year 2017. Occupancy, average daily rate, total revenue and profits were all less than their respective budgeted amounts, said CBRE Hotels Director of Research Information Services Robert Mandelbaum. "After a five-year period [2011 through 2015] of extremely accurate budget projections, this marks the second consecutive year that owners and operators failed to meet their operating goals," he said.

CBRE studied 722 hotel operating statements that contained both actual and budgeted data for 2017. It found those hotels budgeted a 3.2 percent gain in total operating revenue but revenue growth amounted to just 1.7 percent for the year. "Since rooms revenue made up 63.8 percent of total revenue for the year, it was the budget deficiencies in occupancy and ADR that were the primary causes of the revenue shortfall," Mandelbaum said.

Another indication of weaker than expected market conditions was "sluggish" ADR growth, Mandelbaum said. The properties CBRE Hotels studied achieved a 1.8 percent ADR gain during 2017. But this was well under the 2.5 percent forecast growth rate. "Combined, the decline in occupancy and slow ADR growth rate resulted in a rooms revenue gain that was nearly half the budgeted growth rate (of 3.3 percent)," he said.

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