Hotel & Motel Management - November 3, 2008 - (Page 24)

24 Trends & Stats H&MM November 3, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Performance of branded, independents in downturns IN THE details Independent vs. chain hotels Independents better rate in downturn Brands better in recovery Independents higher RevPAR gains Chain-afﬁliated vs. independent hotels ADR percent change 12-month moving average 1990 to 1992 5 4 3 2 1 0 -1 January 1990 January 1991 January 1992 Chains Independents By Jan Freitag H&MM Columnist A s the U.S. lodging economy faces continued headwinds from the ﬁnancial crisis and decreased consumer conﬁdence, STR frequently is asked about the performance of branded vs. non-branded hotels. Here we examine the performance of independent hotels through the last two downturns and contrast that with today’s situation. The ﬁrst three charts show independent hotels perform slightly better in a downturn with regards to rate growth. Between 1990 and the beginning of 1992, average daily rate growth for chainafﬁliated hotels dropped from around +3.3 percent to -0.3 percent, measured as a 12-month moving average. At the same time, rate increases for non-afﬁliated properties remained positive, falling from +4.2 percent to +0.5 percent. During the peak at the beginning of 2001, prior to the downturn that preceded the 9/11 attacks, rate growth for chain hotels was very strong at 5.1 percent, but STR recorded an even stronger 6.2 percent for non-branded hotels. The events of 9/11 led to fairly sharp declines in rate growth, and neither independent nor chain hotels were immune to rate decreases. Independent rate decreases dropped to -4.5 percent in June of 2002, but chainafﬁliated hotels had to wait until August 2002 when their rate decrease ﬁnally bottomed out at -5.0 percent. Currently, chain hotels lead the slowdown in rate growth. In December 2007, rates increased by 6.5 percent for independent hotels but only 5.9 percent for chain properties. While the slowing continues across the board, the differential in ADR percent change we reported in August 2008 remained 60 basis points in favor of non-afﬁliated hotels. However, changes in ADR don’t necessarily translate into higher revenue per available room for independent properties, as shown in the bottom charts. Our data suggests customers ﬂock to brands in a recovery, and chain hotels’ occupancy grew faster after 1992 and after 2003. One reason for this could be the larger amount of advertising dollars available to brands, building a stronger marketing message. It also is interesting to note that between 2004 and 2006, chain-afﬁliated hotels consistently grew occupancy faster than non-branded hotels. Because of higher gains in occupancy, chain hotels grew RevPAR faster than independent hotels in just 88 of the 236 months of observations, meaning independent hotels more often than not post higher RevPAR gains. That said, it is a fallacy to assume independent hotels perform in lockstep like brands would. Each independent operator makes decisions often only in reaction to local market conditions. So, pricing decisions seem to lag the overall market downturn, and today, this actually aids the performance of non-branded hotels. hmm@questex.com Jan Freitag is VP of global development for STR (www.smithtravelresearch.com). Chain-afﬁliated vs. independent hotels ADR percent change 12-month moving average 2000 to 2002 8 6 4 2 0 -2 -4 -6 January 2000 January 2001 January 2002 Chains Independents Chain-afﬁliated vs. independent hotels ADR percent change 12-month moving average 2007 to August 2008 8 7 6 5 4 3 January 2007 January 2008 Chains Independents Chain-afﬁliated vs. independent hotels RevPAR percent change 12-month moving average 1989 to August 2008 15 10 5 0 -5 -10 -15 January 1989 January 1993 January 1997 January 2001 January 2005 Chains Independents Chain-afﬁliated vs. independent hotels occupancy percent change 12-month moving average 1989 to August 2008 6 4 2 0 -2 -4 -6 -8 January 1989 January 1993 January 1997 January 2001 January 2005 © 2008 Smith Travel Research Chains Independents http://www.HotelMotel.com http://www.HotelMotel.com/digital_edition http://www.smithtravelresearch.com

Table of Contents Feed for the Digital Edition of Hotel & Motel Management - November 3, 2008

Hotel & Motel Management - November 3, 2008 Contents The Rate Debate Accor Defines Motel 6 Prototype Rollout Holiday Inn Eyes Upscale, Timeshare Perspective Economy Sets Tone at The Lodging Conference Mellow Vibe Meets Bold Design at HD Boutique Expo IH/M&RS to Focus on Going Green Legally Speaking Sales Clinic On Finance Travel Trends Cornell Insights Franchise Law HotelWorld Update Trends & Stats Energy Star Update Energy Star Update An Industry Connected People on The Move Annual GM Survey Point-of-Sale Systems IH/M&RS Product Preview Outdoor Lighting Refrigeration Marketplace Ad/Editorial Index Classifieds Checking Out

Hotel & Motel Management - November 3, 2008

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