BOULDER, Colorado—STR, the parent company of HotelNewsNow.com, recently released the 2011 HOST Study, an analysis of more than 6,200 income and expense statements (year-end 2010) from all chain-types and markets across the United States. The report is thorough in its analysis of performance in each scale and in different geographic regions, and in general it shows most scales trended similarly in profit as they had in rooms revenue in 2010.
There are opportunities to dissect such a trove of data numerous different ways, and to supplement the information already found in the report we thought it might be interesting to drill down a bit deeper and look at different income and expense factors both by market and by chain scale. Once the data are segregated by market, we can then display the results on a map, so you can easily see any performance trends.
In this first of a series of articles, we have analyzed hotel profit change by both market and chain scale. STR has defined 116 specific markets in the U.S., and we have taken all HOST income and expense statement from hotels that reported in both 2009 and 2010 (approximately 5,100 hotels) and broken them down by market. Next, we went market by market and separated out the statements by each chain scale. Finally, we looked at the percent change in house profit (income before fixed expenses) for each one of the resultant groups.
The following is a series of maps delineating the results for each one of the chain scales, excepting independents (which span a variety of property types). Note that any market areas shown in white on the maps either had no hotels or an insufficient number of hotels reporting HOST data.
For the economy chain-scale, 2010 was a year of positive profit growth for many markets. Profit increases were generally strongest in the Midwest and parts of the Southeast, with Houston; Nebraska; and Louisiana South being particularly strong. The three worst-performing markets in profit change were Rhode Island; Birmingham, Alabama; and Grand Rapids, Michigan.
The midscale chain scale had better participation in general across all markets, and had more markets reporting positive profit growth. Again, the Midwest and Southeast were particularly strong, while markets such as Nevada (excluding Las Vegas); Alabama South; and Wyoming fared the worst.
Upper midscale hotels had some of the best participation in the HOST program, and nearly every market had coverage. The most noticeable difference (aside from coverage) in the upper midscale and the preceding maps is the dominance of poorer performing markets. For the most part, markets that showed some profit growth in the lower chain scales turned to flat or negative growth in the upper midscale segment, suggesting perhaps that the slight increases in rate that hotels were able to realize in 2010 were more difficult to translate into profit increases, most likely because of a higher proportion of fixed costs.
The trend of markets showing poorer profit performance as we continue up the chain scales bears true with the upscale and upper upscale hotels as well. Markets like Kansas and Colorado, which did quite well in the economy, midscale, and upper midscale, posted profit declines in the upscale and upper upscale segments. The same hold true for Kentucky; Arizona; Washington D.C.; New Mexico; and parts of California.
Finally, while luxury hotels had the lowest participation in the HOST program, in general these properties were the least likely to have profit growth in 2010. In fact, only three markets did: Cleveland; San Diego; and Anaheim, California. The greatest profit losses in the luxury scale occurred in other areas of California (Central Coast, San Jose, Los Angeles) as well as the Ft. Lauderdale, Florida, area.
While there are no universal trends that apply across all markets and chain scales, it does appear that the chain scales with the lowest average daily rates were more likely to post flat or positive profit growth, particularly in the Midwest and Southeast. A part of this might be the result of how much fixed costs increased in 2010, as these costs for the upper-end scales can play a large part in whittling down any potential profits. An analysis of fixed costs by region may warrant consideration for the next article in the series.
The HOST Study provides a review of the US market in one printed publication. STR's HOST Study covers more than 6,200 U.S. hotels and provides the financial information for full-service vs. limited-service hotels, which in turn are reviewed by segments, location and size. If you wish to choose your own set of hotels, our Custom HOST report is the right choice for you. Custom HOST Reports can be ordered for entire states, metropolitan areas, or for competitive sets of individually selected hotels. Click here for more information and to order.