Hotel & Motel Management - September 3, 2007 - (Page 18)

18 Trends & Stats H&MM September 3, 2007 | HotelMotel.com www.HotelMotel.com/digital_edition Segment’s occupancy supports rate growth IN THE details Midscale without F&B Rapid supply growth ADR has recovered Demand still strong Midscale w/out F&B 12 months moving average supply and demand percent change 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0 Jan. 2003 July 2003 Jan. 2004 July 2004 Jan. 2005 July 2005 Jan. 2006 July 2006 Jan. 2007 Supply Demand By Jan Freitag H&MM Columnist A s of June 2007, Smith Travel Research tracked more than 8,000 hotels with some 750,000 guestrooms in the midscale-withoutfood-and-beverage category. We have observed rapid supply growth in this segment since June 2001 with an addition of some 128,000 guestrooms. These rooms account for 23.5 million new available roomnights, but the above-average supply increase was almost completely absorbed because demand for rooms in this category increased by 19 million new roomnights since June 2001. The supply situation at the beginning of the decade was characterized by the recession and the terrorist attacks and little development money was available to build new hotel projects. Projects already existing in the construction pipeline were still ﬁnished and opened, but little new room supply was observed through 2005 when the construction activity and the supply curve picked up again. Demand bounced back sharply through 2004. Demand increases of over 7 percent per year are, in general, hard to sustain, but it is interesting to note that this segment reported demand increases on a 12-month moving basis of upward of 4 percent from the summer of the year 2003 through the beginning of 2007. Chart 2 shows the occupancy of the segment back to June 2001. It is noteworthy that the strong demand numbers reported post-9/11 are now absorbed and the new inﬂux of rooms took its toll on the scale-wide occupancy. Occupancy ﬁgures of above 64 percent seem to be the foundation that supported rate growth over the past couple of years. After a period of relatively unchanged average rates between 2001 and 2004, average daily rate increases in the past three years were a lot more pronounced. Chart 4 compares the percent change increase of both ADR and occupancy back to the summer of 2001. In the later part of the industry cycle, it is typical to observe stabilizing occupancies while rates continue to increase. The midscale-without-F&B segment is no exception to this rule. Over the past three years, we reported ADR percent changes that were well above the rate of inﬂation and properties in this segment now recovered most of the average rate that was lost to discounting in the difﬁcult period between 2001 and 2002. The average age of a U.S. hotel property currently is around 25 years. The average life span before demolition is about 33 years. Hotels in this segment are on average only 11 years old and their average life span is only 18 years. As the segment matures, it is likely that the life span expands as well, but for now the hotels in this class are probably skewing the U.S. average age downward by a measurable factor. hmm@questex.com Jan Freitag is vice president of Smith Travel Research (www.smithtravelresearch.com). Occupancy percent midscale w/out F&B year to date June 2001-2007 68 66 64 62 60 58 56 2001 2002 2003 2004 2005 2006 2007 62.3 61.2 59.8 62.2 66.4 64.6 65.8 ADR midscale w/out F&B year to date June 2001-2007 100 90 80 70 60 50 40 2001 2002 2003 2004 2005 2006 2007 67.94 67.13 67.38 69.08 80.34 74.08 86.08 Midscale w/out F&B number of existing properties by age bracket 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 4,503 Occupancy and ADR percent change midscale w/out F&B year to date June 2002-2007 10.0 8.0 6.0 Occupancy percent change ADR percent change 8.5 7.2 7.1 Number of hotels 2,367 4.0 2.0 0.4 654 3.9 2.5 4.0 2.7 0.0 208 83 9 184 -20 -4.0 -1.8 -1.2 -2.2 -1.0 0-9 10-19 20-29 30-39 40-49 Age brackets 50-59 60+ 2002 2003 2004 2005 2006 2007 © 2007 Smith Travel Research http://HotelMotel.com http://www.HotelMotel.com/digital_edition http://www.smithtravelresearch.com

Table of Contents Feed for the Digital Edition of Hotel & Motel Management - September 3, 2007

Cover Contents Convention Centers Add Bells and Whistles Questex Media acquires Five Star Alliance Perspective At Your Risk Energy Star Update Sales Clinic Transactions Awards Trends & Stats Wireless Networking Northwest Pipeline Coffee Services Ad/Editorial Index Marketplace Classifieds Checking Out

Hotel & Motel Management - September 3, 2007

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