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The year-end RevPAR recovery race
January 24 2011

Which markets came out on top and which were the U.S. industry laggards? Find out in this edition as the 2010 RevPAR race comes to a close.

Highlights
  • New Orleans won the 2010 RevPAR race with 14.7% growth in the metric.
  • Houston was the U.S. industry laggard with a 4.2% RevPAR decrease.
  • Only seven of the Top 26 markets increased year-over-year ADR.
By Orly Ripmaster
HNN columnist

BOULDER, Colorado—2010 is history! Accordingly, this edition of the RevPAR Recovery Race series features the 2010 year-end results.

Of the Top 26 markets, the greatest 2010 revenue per available room recovery was achieved by New Orleans. From December 2009 to December 2010, New Orleans improved its Trailing 12 Month (“TTM”) RevPAR from US$65.32 to US$74.92, representing an impressive 14.7% overall RevPAR improvement—the largest growth among the top United States markets.

As a summary of the year-end results, the following table details the TTM moving average RevPAR of year-over-year percentage growth. The chart is organized in descending order with New Orleans appropriately featured in the top spot.

Utilizing the TTM time period helps normalize the data and substantiates a 12-month sustainable growth rather than a unique monthly/seasonal irregularity.

The previous table illustrates that New Orleans, Boston, New York, Miami and Denver were the only markets to achieve solid, double-digit RevPAR growth during 2010. In fact, when isolated from the remaining markets, these five markets achieved an average RevPAR growth of 12.4% while the remaining 21 markets only averaged 4.3%.

Conversely, the bottom five markets continued to struggle, including Tampa and Houston, which both still experienced RevPAR declines of -1.5% and -4.2%, respectively. Houston is the 2010 U.S. Top 26 market laggard. The market’s results likely are attributable to supply growth. Houston experienced a 6.1% supply increase during the same one-year period. Consequently, with only a 5.8% demand increase, the new supply struggled to be absorbed into the market and Houston continues to face overall occupancy declines. Tampa, on the other hand, is the Top 26 U.S. markets laggard in terms of ADR growth with a -7.2% average daily rate decline during 2010.

There are only seven markets out of the Top 26 that were able to increase their 2010 ADR over the previous year. Of these seven markets, five of them were the race’s overall Top 5: New Orleans, Boston, New York, Miami and Denver. These top markets represented an average ADR growth of 3.1% during 2010, significantly higher than the -1% average change exhibited by the Top 26 markets in aggregate. This statistic alone helps quantify the ubiquitous statement that while demand is a leading indicator of market recovery, rate is the indicator of sustainable growth.

RevPAR Positioning Matrix

Each market is achieving a unique combination of occupancy growth and ADR growth that is contributing to its overall RevPAR positioning in comparison to the other U.S. markets. As an insightful and powerful graphical representation of those various revenue achievements, the graph below plots each individual market on a X-Y scatter plot. The X-axis represents 2010 occupancy change while the Y-axis represents 2010 ADR change. The axes intersect at the U.S. Top 26 market average for occupancy and ADR change (7% and -1%, respectively). Each orange dot represents an individual market out of the Top 26 U.S. markets. The number inside each of the dots corresponds to that market’s 2010 RevPAR Rank (1-26). We’ve labeled the Top 5 and the Bottom 2 markets with their market name to provide a guideline for interpreting the graph. The remaining markets/ranks are provided in the legend. 

The previous graph, which STR Analytics calls the RevPAR Positioning Matrix (RPM) allows a more in-depth understanding of the performances achieved amongst the individual markets. As RevPAR growth is a factor of both occupancy and ADR growth, each individual market achieves its respective RevPAR growth through a unique combination of both. Certain markets likely will achieve growth in one metric more significantly than the other. For example, New York indicates significant ADR growth (highest on the Y-axis), but below average occupancy growth, while Detroit (ranked No. 9) shows leading occupancy growth (furthest right on the X-axis) but below-average rate growth. Each market’s performance is an attempt to achieve the most effective occupancy/ADR combination given the unique attributes of the market.

We invite you to analyze the tables and charts presented in this article for patterns and trends that you perceive as well. Keep following your market, and we’ll continue to keep analyzing new ways of slicing and dicing this data to show that even though the overall RevPAR recovery is significant, there are varying degrees of progress among the Top U.S. Markets. In the meantime, contact me at orly@stranalytics.com if you are interested in further information about these markets or the STR Analytics RPM reports.

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