HENDERSONVILLE, Tennessee—Among the U.S. midscale segment’s performance metrics, perhaps most notable is the chain scale’s 6.4% decline in room supply through May 2011, according to data from STR.
Indeed, the midscale population during the past decade saw a steady erosion of rooms available, attributable to conversion out of the segment and a lack of new rooms and conversions into the segment, said Brad Garner, COO of the Hendersonville, Tennessee-based research company.
More than 85,000 rooms converted out of the midscale segment during the 12-month period through May, while more than 33,000 rooms converted in, according to STR, the parent company of HotelNewsNow.com.
senior VP, STR
As of June, the chain scale had 519,509 rooms in its existing U.S. supply with an additional 3,800 rooms under construction, according to the STR/McGraw Hill Construction Dodge Pipeline Report.
That erosion has impacted other performance indicators, most notably rooms sold, which was down 1.9% though May.
“A declining base of rooms equates to less rooms available. You’re selling less of what you have,” said Jan Freitag, senior VP at STR.
In order to mute the bias of conversion activity on performance metrics, STR conducted a same-store analysis for HotelNewsNow.com. It took the current group of midscale-coded properties and looked back at performance through time. The analysis does not account for conversion activity in and out of the segment.
Put simply: The analysis takes the variable of conversion out of the equation.
An analysis of occupancy, average daily rate and revenue per available room suggests a broad-based consistency in the segment regardless of conversion activity.
There’s more variance in the measures of demand and revenue, which, for the reasons described above, is not surprising, Freitag said. Having removed conversion activity, the same-store analysis suggests a more vibrant recovery in the segment, especially year to date through May.
Also interesting to note is the relative consistency of the segment’s demand growth during the past 20 years. Despite understandable drops during the recessions of 1991, 2001 and 2009, demand growth for midscale hotels has hovered around the 5% mark—a point to which the metric has returned in the month of May (5.4%).
The midscale segment doesn’t ride the wild upswings or downturns often seen in the rest of the market, Garner said. That’s due primarily to the chain scale’s value-conscious traveler, a fact which is even truer during the past 18-24 months.