Hotel & Motel Management - January 7, 2008 - (Page 22) 22 Trends & Stats H&MM January 7, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Economy property analysis yields surprising results IN THE details Occupancy remains steady Nationwide RevPAR is $38.19 Weekend occupancy highest Location has big effect Economy chain scale — Selected metrics — YTD October 2005-2007 70 60 50 40 30 20 10 0 2005 2006 2007 $29.35 $31.00 $31.78 Occ 58.6% ADR RevPAR 58.7% 58.7% $52.81 $54.14 $50.07 By Jan Freitag H&MM Columnist mith Travel Research tracks 9,700 economy properties with more than 750,000 guestrooms in its performance database. This article examines the performance of these hotels according to room count and location type. Through October 2007, economy properties achieved occupancy of 58.7 percent, the same as through October 2006. The cause for this was that the 2percent increase in the number of guestrooms sold was equalized by the same percent increase in the number of guestrooms available. Average daily rate increased 2.5 percent to $54.14 and the resulting revenue per available room increase also was 2.5 percent, bringing the nationwide RevPAR for the economy chain scale to $38.19. Performance by day of week is strongest on the weekends, with occupancy higher than 65 percent because of leisure travelers. ADRs vary only very slightly during the week, ranging from $51.20 to $52.20 between Sunday and Friday. This is interesting because traditionally we would expect rates to be lowest on Sunday and Monday nights, then increase and peak on Wednesday and Thurs- S day nights. But weekend rates are higher by about $5, up to $57.70 on Saturdays, probably in reaction to the pronounced demand spike on those days. Performance metrics by size of property show that occupancy increases as the number of rooms increases, from 56.8 percent for economy hotels with less than 75 rooms to 61.9 percent for properties with more than 125 rooms. The reason for this higher occupancy may be the ability for this larger property type to attract leisure groups. Interestingly, ADR distribution does not mirror this trend. Economy hotels with the smallest room count have the highest rate, $57.62, roughly $5 higher than the other two property sizes. This increased ADR can be explained partially by the higher Friday and Saturday rates of more than $60 for properties with less than 75 rooms. If it is true that larger properties attract proportionately more groups, then we would expect those rates to be slightly lower. Economy hotels have vastly different performances when examining location types. Properties in urban markets have a higher-than-average occupancy with 61.4 percent and an ADR of $64.17. More importantly, rates for these hotels increased 6.5 percent in 2006 and 5.3 percent year to date, while occupancies have decreased over the same time period. The highest occupancy, 64.9 percent, was reported for economy properties near airports. Hotels in small-town/metro locations had the poorest occupancy performance but were able to achieve a robust rate of about $57.39. These hotels often are the only option in an area and therefore can price their rooms accordingly. hmm@questex.com Jan Freitag is vice president of Smith Travel Research (www.smithtravelresearch.com). Economy chain scale — Selected metrics percent change — YTD October 2005-2007 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Occ 1.0% 0.0% 2.8% 4.1% 2.5% 2.5% 5.5% 2005 2006 2007 7.1% 5.6% ADR RevPAR Economy chain scale —Occ vs. ADR by day of week — 12 months ending October 2007 80 70 60 50 40 30 20 10 0 Sun Mon Tue Wed Thur Fri Sat $52.00 52.0 $51.20 46.3 55.3 $51.50 56.6 $51.70 57.3 $52.20 Occ % ADR 65.4 $56.60 67.2 $57.70 Economy chain scale — Selected metrics by location type — YTD October 2007 75.0 65.0 55.0 45.0 35.0 25.0 15.0 5.0 0.0 Urban Airport Interstate Small-town/ metro Occ ADR 64.9% $54.26 55.0% $51.73 54.2% $57.39 Economy chain scale — Selected metrics by property size — YTD October 2007 64.0 62.0 60.0 58.0 56.0 54.0 52.0 50.0 48.0 46.0 Less than 75 rooms Between 75 and 125 More than 125 rooms $52.06 $52.45 56.8% $57.62 59.1% Occ ADR 61.9% 61.4% $64.17 © 2007 Smith Travel Research http://www.HotelMotel.com/digital_edition http://www.HotelMotel.com http://www.smithtravelresearch.com
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