BOULDER, Colorado—STR 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.
This is the second in a series of articles in which we take HOST data and represent it geospatially. In this article, we look at total payroll costs (as a percent of rooms revenue) by both market and chain scale. STR, the parent company of HotelNewsNow.com, 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 total payroll costs for each one of the resultant groups.
The following is a series of maps delineating the results for each one of the chain scales, except for independents (which span a variety of property types). Note that any market area shown in white on the maps either had no hotels or an insufficient number of hotels reporting HOST data.
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As expected, payroll costs are typically lowest for economy hotels because of the more limited staffing needs for this property type. Coastal areas had some of the lowest costs here, with California, Oregon, Washington and many areas on the Eastern seaboard reporting costs from 10% to 25% of rooms revenue. Most other areas were in the 25% to 35% range, with Nebraska the only area slightly above the 35% mark.
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The midscale chain scale showed some similarities, although now instead of the coasts, the areas with the lowest payroll costs included the Mountain region, Texas and a good portion of the Southeast. Many markets here reported total payroll costs between 25% and 35% of rooms revenue, while Kansas and Nevada (excluding Las Vegas) reported payroll levels just above 50% for midscale hotels.
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Upper-midscale hotels showed a broad and fairly even distribution of payroll costs levels, with the plurality of markets in the 25% to 35% range. No markets that reported data had payroll costs exceeding 50% of rooms revenue in the upper -midscale chain scale except one: Total payroll costs for the San Francisco/San Mateo area were 62% of rooms revenue in this chain scale, suggesting rates for this property type simply cannot compensate for the cost of labor in markets like San Francisco.
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As we move toward the upscale chain scale, we start to see a lot more yellow dispersed through the map, which represents payroll costs in the 35% to 50% range. The markets with the best-controlled costs in this chain scale were South Dakota; Madison, Wisconsin; and the Florida Panhandle. Interestingly, not one market in the upscale chain scale reported payroll costs more than 50% of rooms revenue, so while absolute payroll costs for upscale hotels were assuredly greater than the lower chain scales, these costs are being more efficiently absorbed by the ability to drive higher average rates.
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Once we get to the upper-upscale chain scale, there are very few markets reporting payroll costs less than 35% of rooms revenue, although in general there are also less markets with sufficient-enough data to report at all. The more efficient markets in this chain scale include Richmond-Petersburg, Virginia; Indiana North; Myrtle Beach; and Madison. Of the 89 markets reporting data, 50 of them reported payroll costs amounting to more than 50% of rooms revenue, with Riverside-San Bernardino, California; and Tucson, Arizona, reporting more than 80%.
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Finally, while luxury hotels had the lowest participation in the HOST program, in general these properties had the highest payroll costs as a percent of rooms revenue. Luxury hotels suffered the worst in the downturn in 2008 and 2009, and while their rates rebounded somewhat in 2010, this wasn't generally enough to mitigate the crushing costs of payroll. Every reporting luxury market had payroll costs exceeding 50% of rooms revenue in 2010, and those faring best were San Antonio, New Orleans, Houston and Austin, Texas. On the other end of the spectrum, two markets reported payroll costs in excess of 100% of rooms revenue: St. Louis and San Jose-Santa Cruz, California. It's likely that, given the strong rebound in luxury-scale average rates in 2011, this time next year there will be an abundance (or at least some) shades of yellow and green in this same map.
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.
