Hotel & Motel Management - October 1, 2007 - (Page 16)

16 Trends & Stats H&MM October 1, 2007 | HotelMotel.com www.HotelMotel.com/digital_edition Occupancy growth hangs on for most hotel locations IN THE details Industry by property location Supply edges out demand Occupancy will fall Healthy RevPAR numbers Location segments —Supply/demand percent change July 2007 YTD 4 Supply Demand 1.9 0.9 1.2 1.5 0.6 0.3 1.4 1.4 1.9 1.2 By Jan Freitag H&MM Columnist S mith Travel Research categorizes the 4.5 million rooms in the U.S. lodging inventory into six distinct location types. The largest location segment is “suburban,” with 1.6 million rooms or 36 percent of inventory. The location type “airport,” with 278,000 rooms, accounts for roughly 6.2 percent of all rooms. Other location types we established are “urban,” for properties in the center of major metropolitan markets, “interstate,” for hotels within a sixmile corridor around major highways and interstates, “resort,” for properties in areas that obtain a large part of their demand from leisure guests and ﬁnally “small town/metro” properties, in locations outside of a metropolitan area and hotels that do not ﬁt any other category. Through July 2007, the U.S. lodging industry faced tough comparisons compared to the prior year. The supply/demand trends that we observed through mid-2006 reversed through July 2007 and now the industry is building more new rooms than it is selling. Only the suburban and resort markets reported an increase in rooms available that outpaced the number of rooms sold. Through July 2007, hotels in resort locations reported the slowest growth of new supply, but this was also the only location type with negative room sales. The strong increase in new rooms in the suburban areas is likely a result of limited service hotels being built in secondary or tertiary markets, which currently are in favor with the development community. Unfortunately, in those locations, new demand is not keeping pace with the building boom. The strong demand increases of the past years convinced many developers to pursue opportunities in these locations, but their efforts seem to come to fruition right around the same period. So for the ﬁrst time since the downturn of 2001, overbuilding in certain markets is a real possibility. In contrast, the healthy increase in demand in urban, airport and interstate locations is a good indicator for the health of the economy and business travel overall. Alternative metrics, such as airline load factors, also point at strong demand from business travelers, which should beneﬁt properties in urban and airport settings. Because demand still outpaces supply—although in some instances only barely—occupancy growth is still positive in four of the six location types. At the same time, ADR growth continues to dominate RevPAR growth. Through July, the national ADR percent change was reported at +5.7 percent and hotels in urban and airport locations were able to outperform this already strong increase. We view this as another indicator of the health of the underlying business travel trends. RevPAR growth rates moved in lockstep with the strong rate increases and were only slightly moderated by occupancy decreases. But when discussing the July yearto-date room revenue growth rates, the question of long-term sustainability needs to be raised. It seems hard to imagine that revenues in urban and airport locations can be increased by 9 percent or 8 percent, respectively, for much longer. The robust ADR growth through the middle of this year is fueled by strong occupancies that hotels in almost all location types experienced. Urban, airport and resort hotels sold almost seven out of 10 available rooms every night. In sharp contrast, the occupancy in hotels in the nonmetro markets are about 12 points less respectively, at around 58 percent. The ADR of hotels across the U.S. ﬂuctuates widely by location type. For example, a room in an urban hotel is more than twice as expensive as a hotel at a highway location. Resort hotels, despite the recent drop in occupancy, still command among the highest rates among the location segments. And urban and airport hotels reported a more than $40 rate differential in favor of urban hotels. As the U.S. hotel industry works its way through the current cycle and the inﬂux of new rooms increases, it will be interesting to monitor changes in ADR and occupancy. If the past is any indicator, urban and airport hotels will continue to perform well, while resorts may face a tougher road. hmm@questex.com Jan Freitag is vice president of Hendersonville, Tenn.-based Smith Travel Research. 2 1.7 0 -0.9 -2 Urban Suburban Airport Interstate Resort Small Metro Location segments — Occupancy/ADR percent change July 2007 YTD 10 7.7 5.6 6.0 5.1 4.7 4.9 Occupancy ADR 5 0 0.1 -0.8 0.4 0.3 -1.1 0.5 -5 Urban Suburban Airport Interstate Resort Small Metro Location segments — RevPAR/Room Revenue percent change July 2007 YTD 10 9.0 8.0 6.3 6.5 5.5 5.4 3.5 3.8 8.0 7.0 6.7 RevPAR Room Revenue 5 4.7 0 Urban Suburban Airport Interstate Resort Small Metro Location segments — Average daily rate (in Dollars) July 2007 YTD 170 150 130 110 99.48 143.27 147.08 90 70 50 Urban 89.80 77.50 66.21 Suburban Airport Interstate Resort Small Metro © 2007 Smith Travel Research http://HotelMotel.com http://www.HotelMotel.com/digital_edition

Table of Contents Feed for the Digital Edition of Hotel & Motel Management - October 1, 2007

Hotel & Motel Management - October 1, 2007 Contents Independents Rely on Guest Feedback Models Showcase Aloft, Element Brands Trainers Emphasize Communication, Cooperation Perspective At Your Risk Satisfaction Trends Sales Clinic Energy Star Update HotelWorld Update Trends & Stats Dressing Walls in 'Green' Music Programming Provides a Sound Solution Remote Check-In/Out for Leisure Travelers Q&A: Western U.S. Pipeline Softgoods - Beds and Bedding Transactions A Cause Célèbre Awards People on the Move Events Cleaning and Maintenance Solutions Marketplace Ad/Editorial Index Classifieds Checking Out

Hotel & Motel Management - October 1, 2007

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