Hoteliers Post Strong Numbers as Construction Slows

While tourism entities debate whether 2017 was a “bump” or “slump” year, hoteliers, at least, are checking in with good news for the start of 2018.

According to data from STR, a global benchmarking firm, the U.S. hotel industry is reporting positive results in three key metrics for January 2018. Specifically, the industry has seen occupancies increase by .9 percent over last January, driving the nationwide average to 54.5 percent. The average daily rate (ADR) has also climbed 2 percent, to a nationwide average of $123.33. Finally, RevPAR, an industry metric that indicates revenue per available room has increased by 2.9 percent to average $67.17 across the country.

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“The industry started 2018 just like it ended 2017—with each of the key performance metrics at record levels,” said Jan Freitag, STR’s senior VP of lodging insights. “Year-over-year RevPAR growth remained modest and driven primarily by ADR, which increased at least 2 percent for the fourth month in a row. Supply grew at a healthy 2 percent again, but a 2.9 percent rise in demand was more than enough to counter that, even though it was the lowest demand growth figure in the U.S. since August.”

STR also reports that this is the 95^th consecutive month to reflect an average increase in RevPAR.

Key Performances

—Of STR’s tracked “Top 25 Markets,” Houston, Texas, reflected the only double-digit increase in occupancy (+14.6 percent to 63.9 percent.)

—Minneapolis/St. Paul, Minnesota-Wisconsin, saw the only double-digit increase in ADR (+10.5 percent to $117.25), although an uptick in room rates is likely attributed to hosting the Super Bowl that same month.

—Orlando, Florida, reported the second-largest increase in ADR (+8.9 percent to $135.96.)

—Washington, D.C.-Maryland-Virginia, reported the sharpest declines in all three metrics: occupancy (-7.3 percent to 52.3 percent), ADR (-22.8 percent to $132.23) and RevPAR (-28.4 percent to $69.17). The decreases, said STR, correspond to a bump in 2017 traffic due to the presidential inauguration and the Women’s March.

—Tampa/St. Petersburg, Florida, experienced the second-largest decreases in occupancy (-4.1 percent to 68.7 percent.)

Pipeline Data

While the mechanics of supply and demand worked in favor of hoteliers for January, STR is also reporting a decline in hotel construction throughout the United States.

According to STR’s pipeline data, in December there were 1,400 hotels and 179,979 rooms under construction across the country, a number which has remained flat or declined for three consecutive months.

For December, the number reflects a 3.7 percent decrease when compared with 2016. It is also the biggest year-over-year decrease since September 2011 (-7.8 percent). What’s more, the decrease follows a November (+0.6 percent) and October (-0.1 percent), where construction numbers remained relatively flat.

"We’ve seen three months in a row where construction numbers either decreased or remained flat, and we feel we can now call that a trend,” said Freitag. “A construction decline obviously bodes well for the current industry cycle. It appears that financing is becoming harder to obtain, and if demand growth holds, occupancy will not deteriorate as quickly or as much as anticipated.”

New York City remains the construction leader in the U.S. with 12,074 rooms being built across 69 hotels. New York is also in the midst of a major infrastructure upgrade, including a complete overhaul at LaGuardia Airport.

Dallas, Texas and Nashville, Tennessee are also reporting more than 5,000 rooms under construction. Of the three, only Nashville has seen its construction activity increase over last year.