Headlines – Week of July 11, 2010

July 16, 2010

STR: Host Study reveals U.S. hotel industry hit hard in 2009

According to a report issued by Smith Travel Research (STR), the U.S. hotel industry ended 2009 with US$92.41 billion in room revenue, the lowest year-end room revenue since 2004 (US$85.18 billion). 

The information was gathered from the Hotel Operating Statistics (HOST) Study for 2009, compiled by STR.

The HOST Study is an extensive and definitive database on the U.S. hotel industry revenues and expenses. The study includes operating statements from more than 5,900 hotels. HOST contains information on hotel revenues and expenses, as well as presents information by department including rooms, food & beverage, marketing, utility costs, property and maintenance, administrative & general, and selected fixed charges.

According to the HOST Study, room revenue in 2009 fell 14.2% in year-over-year comparisons. Total revenue for the industry declined US$13.4 billion to US$127.2 billion. This loss in revenue resulted in a reduction in the Gross Operational Profit (GOP) to 34.0%, compared to 38.2% in 2008.

Each of the three key performance metrics, including occupancy, average daily rate and revenue per available room, reported decreases during every month of 2009.  RevPAR fell 16.7% to US$53.53, the worst decline recorded since STR started tracking the industry in 1987.

Other highlights of the HOST Study:

  • Full-service hotels reported an average occupancy rate of 62.5% and ADR of US$146.74 in 2009, compared with 2008 when occupancy was 67.4% and ADR was US$164.31.
  • Full-service hotels’ GOP for 2009 was 29.4%, compared to 34.3% in 2008.
  • Among the participants, full-service hotels generated US$233.72 in total revenue per occupied room night. Full-service independent hotels produced US$295.22 in total revenue per occupied room night, and full-service chain-affiliated hotels produced US$227.86.
  • Overall, limited-service hotels reported occupancy of 63.3% for 2009 and year-end ADR of US$85.26.
  • GOP for participating limited-service hotels in 2009 was 47.1% (compared with 51.2% in 2008), which amounts to US$9,485 per available room.
  • Among the limited-service hotels, the Middle Atlantic region reported the highest occupancy (68.6%), followed by the Pacific region (68.4%).

 STR/TWR/Dodge: Hotel Construction Pipeline

The total active U.S. hotel development pipeline comprises 3,387 projects totaling 358,739 rooms, according to the June 2010 STR/TWR/Dodge Construction Pipeline Report released this week. This represents a 28.5% decrease in the number of rooms in the total active pipeline compared to June 2009. The total active pipeline data includes projects in the In Construction, Final Planning and Planning stages, but does not include projects in the Pre-Planning stage.

Among the Top 10 Markets by rooms in the In Construction phase:

  • New York topped the list with 9,416 rooms (compared with 12,870 rooms in 2009), which represents a 27.0% decrease from 2009
  • Houston, Texas, with 2,527 rooms (52.0% decrease from 2009)
  • Dallas, Texas, with 2,168 rooms (a 28.0% decrease from 2009)
  • Las Vegas, Nevada, reported 1,243 rooms in the In Construction phase and fell 84.0 percent compared to 2009, for the largest decrease among the top 10 markets.

 Marriott Reports Encouraging 1st Quarter 2010 Earnings

Marriott International Inc.’s (MAR) second-quarter earnings more than tripled, fueling optimism that the lodging industry is finally turning the corner from a brutal downturn.

Wall Street had anticipated a strong second quarter for hoteliers as they continue to benefit from cost-cutting measures and increased corporate and leisure travel despite lingering concerns about the national economy.

Analysts at Robert W. Baird & Co. believe the market is still looking for group bookings to significantly pick up. Baird expects national revenue per available room rates to increase 6% during the second quarter compared to the same period last year and anticipates that increases in revenue will boost profitability for the first time since 2007.

In a sign of improving demand, revenue per available room, or RevPAR, in the first five months of the year rose 1% to $52.99, according to Smith Travel Research Inc. In comparison, it averaged $64.57 in the first five months of 2008.

In the most recent period, Marriott’s RevPAR jumped 9.9%–or 8.2% in constant dollars–beating April’s prediction for 5% to 7% growth.

Posted by Scott R. Lodde

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