Hotel & Motel Management - June 16, 2008 - (Page 14) 14 Trends & Stats H&MM June 16, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Demand/ADR relationship key indicator of health IN THE details A healthy spring RevPAR up 2.5 percent 200,000 rooms under construction Demand environment challenging Total United States room supply/demand percent change 12 month moving average–1989 to April 2008 6 4 2 0 -2 -4 -6 1989 1991 1993 1995 1997 1999 Supply percent change Demand percent change -4.8% 0.6% 5.1% 4.0% 4.2% By Bobby Bowers H&MM Columnist U .S. lodging industry performance through April 2008 has been moderately healthy. Occupancy decreased 2.1 percent and average room rate was up 4.7 percent, resulting in a 2.5-percent revenue per available room increase. April year-to-date room supply grew by 2.2 percent and demand (roomnights sold) was basically flat. Easter 2008 fell in March while Easter 2007 was in April. Consequently, combining March and April performance provides better insights year over year than comparing the months individually. In March/April 2008, occupancy fell 2.6 percent while ADR increased 4.5 percent. This resulted in RevPAR growth of 1.8 percent. Combined March/April demand was down 0.3 percent while room supply increased 2.4 percent. A little more than 200,000 U.S. hotel rooms are now under construction. We expect the majority of these rooms to open in the next 36 months. With roughly 4.5 million hotel rooms currently open, STR Global expects that net U.S. room supply will increase in the 2.0 – 2.5 percent range in both 2008 and 2009. Based on a tougher financing environment and increasing development costs, the planned hotel pipeline should be mon- itored closely for project attrition that could, potentially, lead to lower room supply growth by 2010 and beyond. With a soft economy predicted for the balance of 2008 and into early 2009, we anticipate a challenging demand environment for the U.S. lodging industry. Through April 2008, supply increased 1.8 percent and demand was down 0.2 percent in the top 25 U.S. markets (excluding Las Vegas), resulting in an occupancy decline of 2.0 percent. In all other markets, supply increased 2.4 percent and demand increased 0.3 percent, yielding an occupancy decline of 2.1 percent. Based on April 2008 year-to-date RevPAR, larger markets outperformed smaller markets. RevPAR in the top 25 U.S. markets (excluding Las Vegas) was up 3.5 percent—driven by average roomrate growth of 5.6 percent. RevPAR increased 1.9 percent over the same time period in all other U.S. markets. We expect this trend to hold throughout 2008. Additionally, it appears that business travel might be holding up better than leisure travel, based on April year-to-date numbers. This will be an area to monitor closely throughout the rest of the year. Room rate increases are slowing but not dramatically as of yet. Based on twelve months ending April 2008, U.S. industry ADR increased 5.5 percent versus April 2008 year-to-date growth of 4.7 percent. Room-rate growth has held relatively steady due primarily to relatively flat demand. If demand softens further, moving into a declining range, room-rate growth will likely lose some momentum. Therefore, the demand/ADR relationship will be a key factor in 2008. hmm@questex.com Bobby Bowers is senior v.p. of operations for Hendersonville, Tenn.-based Smith Travel Research. 1.7% 1.2% 2001 2003 2005 2007 Total United States occupancy/ADR percent change 12 month moving average–1989 to April 2008 10 8 6 4 2 0 -2 -4 -6 -8 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Occupancy percent change ADR percent change -0.6% 6.8% 5.5% 7.6% Total United States key performance indicators percent change April YTD 12 2006 2007 2008P 9.6 7.4 6.1 4.7 4.9 2.5 8 4 2.2 1.1 1.9 0.1 -0.2 -1.1 -2.1 2.0 0 -0.2 -4 Supply Demand Occupancy ADR RevPAR Chain scales occupancy/ADR percent change April 2008 YTD 10 Occupancy ADR 5.2 3.8 4.5 3.6 3.6 2.3 Chain scales supply/demand percent change April 2008 YTD 10 5.9 5 3.3 1.8 5 3.1 2.0 3.8 4.9 2.4 Supply Demand 2.2 0 -1.3 0 -1.6 -1.1 -5 -1.9 -3.4 -2.4 -3.5 -2.7 -6.2 -5 Luxury Upperupscale Upscale -10 Midscale w/o F&B Economy Luxury Upperupscale Upscale Midscale w/F&B Midscale w/o F&B Economy Midscale w/F&B © 2008 Smith Travel Research http://HotelMotel.com http://www.HotelMotel.com/digital_edition
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