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‘Unexpected strength’ marks 2012 performance
December 26 2012

Despite persisting negative headlines, the U.S. hotel industry continued to post strong and steady increases in performance during 2012.

  • The U.S. hotel industry posted recorded demand in July 2012.
  • There were 24% more rooms under construction through November 2012 than the same period in 2011.
  • Group demand saw a late-year surge, highlighted by 11.1 million roomnights sold during October.

HENDERSONVILLE, Tennessee—In a year marked by fiscal and political uncertainties, with black swans threatening to land throughout the world, the U.S. hotel industry quietly continued to churn along with strong performance. 

“The numbers continue to surprise,” said Alex Smith, research analyst at STR, parent company of “We keep expecting it to tail off.”

Persisting negative headlines seem to corroborate those instincts, but Smith said that simply hasn’t been the case.

“Unexpected strength has kind of been the theme lately,” he said.

Several other prominent themes emerged during the past 12 months, including:

1. Record demand
“We are still selling more rooms than we ever have before and expect that growth to remain strong in 2013,” said Vail Brown, VP of global business development and marketing at STR, during a recent webinar.

The U.S. hotel industry set a record during July for the most roomnights ever sold in a single month with 105,954,122. The summer months of June and August were strong as well, both posting more than 100 million roomnights sold.

Through November, the most recent data available, U.S. hotels had sold approximately 1 billion roomnights, an increase of 2.9% from the same period in 2011.

STR’s preliminary data suggests the industry ended 2012 with a 2.8% increase in demand.

Click chart to enlarge.

2. Supply slowing creeping
“In the U.S., we are seeing a bump in construction year to date,” Brown said.

The number of hotel rooms under construction was up approximately 24% to 67,468 as of November, according to STR data.

However, the total active pipeline, which also includes projects in the final planning and planning stages of development, was down 3.6% to 299,201 rooms.

Existing supply crept up slowly during the year. After recording a year-over-year supply increase of 0.2% during March, each month brought with it slightly higher supply. Most recently, November finished with more than 145 million rooms open in the country—up 0.7% from the same month in 2011.

Preliminary data suggests 2012 in aggregate ended with a 0.5% increase in supply.

Click chart to enlarge.

3. Rates returning to the peak
While the hotel industry still hasn’t reached its 2008 peak in average daily rate of $107.41, it’s beginning to make headway, Brown said.

November year to date, ADR was up 4.2% to $106.23. And for the first time since 2008, not a single month posted an ADR of less than $100. What’s more, there were two months during the past 12 (July and November) in which monthly ADR was actually higher than their 2008 equivalents.

The majority of increases, Brown said, came from upper-end segments. The luxury segment, for example, likely finished 2012 up 4.8% in ADR compared with only a 3.7% gain in the economy segment, according to preliminary data from STR.

Preliminary data also suggests the hotel industry in general finished the year with a 4.3% increase in ADR to $106.17.

Still, hoteliers have a lot of ground to make up on an inflation-adjusted basis, Brown said. 

“It’s not quite what you’d like to see in the recovery cycle,” Smith said.

Click chart to enlarge.

4. Group’s late-year surge
“We really haven’t seen a large fluctuation in demand this year as compared to last year—until October where we really saw group demand skyrocket past the prior two years,” Brown said.

Hoteliers sold 11.1 million group roomnights during the month, which was well above the “golden year” of 2007, she said.

Those numbers dropped off slightly during November, when the industry sold only 7.9 million roomnights—which was slightly down from last year but ahead of 2007.

Despite strengthening demand numbers, the prior group ADR peaks seen in 2008 still eluded hoteliers throughout the year.

“We are still lagging from a group ADR standpoint,” Brown said, adding that shrinking booking windows has inhibited hoteliers’ ability to drive rate.

The good news, she said, is that November group ADR is above 2011. The bad news? The U.S. hotel industry is still $5 below the prior 2008 peak, she said.

Click chart to enlarge.

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