Last updated: 10:17 AM ET, Mon July 06 2015

U.S. Hotel Rates Soaring, Supply Can't Meet Demand

Hotel & Resort | STR Global | Ryan Rudnansky | April 02, 2015

U.S. Hotel Rates Soaring, Supply Can't Meet Demand

Room demand is so high in the U.S. hospitality industry right now that the industry hardly has enough hotels to accommodate.

Meanwhile, average daily rate (ADR), revenue per available room (RevPAR) and room revenue are through the roof.

STR and PKF Hospitality Research (PKF-HR) recently unveiled numbers from February 2014 to February 2015 at the Hunter Hotel Conference at Atlanta Marriott Marquis, and the results are startling.

Room demand (up 4.6 percent year-over-year), ADR (up 4.6 percent), RevPAR (up 8.5 percent) and room revenue (up 9.4 percent) are at all-time absolute highs for the period, according to STR. Meanwhile, supply (up 0.9 percent) and occupancy (up 3.7 percent) pale in comparison.

Vail Brown, vice president of global business development and marketing at STR, said at the Hunter Hotel Conference that the discrepancy between supply and demand is creating “arguably the best business fundamentals in her lifetime,” per Hotel News Now. In effect, real ADR (adjusted for inflation) in 2015 will be similar to pre-recession numbers.

ADR—not occupancy—will drive RevPAR numbers in 2015, particularly when it comes to the luxury segment, according to Brown. Over the 12-month period, U.S. luxury hotels experienced a 5.5 percent increase in ADR, while recording just a 0.7 percent increase in occupancy.

PKF-HR tracks 59 markets in the United States. Of those 59 markets, 11 are projected to experience RevPAR growth of more than 8 percent by the end of the year. On top of that, 36 markets are expected to post RevPAR growth between 4 percent and 8 percent. Twelve of the 59 markets are projected to experience RevPAR growth of less than 4 percent.

In 2015, there will be sizable increases in demand (2.4 percent), ADR (5.2 percent) and RevPAR (6.4 percent) for the U.S. hospitality industry, according to STR.

Despite supply being low when compared to demand this year, it is worth noting that more hotel rooms are projected to open in 2015 (94,000) than in 2014 (63,000), per STR. As of Feb. 28, 129,000 hotel rooms were under construction (up 32 percent from 2014) and 436,000 rooms were under contract (up 18 percent).

Fewer hotels are closing these days, as well. In 2005, nearly 65,000 rooms closed. In 2014, that number dropped to 23,271.

A strong U.S. economy does stand to impact some of the country’s top markets when it comes to international spending, though.

For example, in December 2014, Miami experienced an ADR increase of 9.1 percent related to the U.S. dollar. That translates to a 23.6 percent ADR increase related to the euro. Boston (ADR up 4.9 percent and 18.8 percent in dollars and euros, respectively) and Chicago (up 3 percent and 16.7 percent) could also see less international spending.

But, overall, hoteliers are seeing dollar signs right now, while U.S. travelers can expect to spend more in 2015.

For more information on STR Global, United States

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