HENDERSONVILLE, Tennessee—As we head toward the Olympics, there will be a lot of attention on record-breaking performance. But that forward-looking perspective should not distract us from several significant developments related to hotel industry performance during the past two months.
Click chart to enlarge.
Anyone who has seen a STR presentation has seen the above slide. This is a graph of running 12-month occupancy and average daily rate from January 1989 to April 2012. If you look at the graph for the past two months, you will see the first milestone: The 12-month ADR percent change has surpassed the 12-month occupancy percent change for two months in a row. The last time the ADR percent change was higher than the occupancy percent change was in December 2009. And the last time that happened while both numbers were positive was in December 2006.
If you look all the way back in history since STR has been tracking these numbers, it’s important to emphasize that there have been very few points in time where the occupancy percent change was greater than the ADR percent change. The most recent time period started in January 2010 and lasted for 27 months. This anomaly only has happened two times before—once for five months from October 2002 to February 2003, and a second time for eight months from December 2003 to July 2004.
It’s also worth nothing that in the first two time periods the difference (occupancy percent change – ADR percent change) was only greater than 1% for a single month. Compare that to the current economic cycle where the difference was greater than 1% for 21 months and was greater than 5% for seven months.
Click chart to enlarge.
The next significant milestone is related to group ADR. The second graph shows the actual monthly ADR values all the way back to 1987. We plot these numbers based upon a 12-month time series to help compare the differences. The white line shows the 2012 numbers. You will note that for the last two months the group ADR for 2012 surpassed the group ADR for 2007 as well as all other years except for the record year of 2008. The fact that the group ADR is starting to close in on the record ADR is great news for the industry.
Click chart to enlarge.
One last milestone to point out is related to overall ADR 12-month moving average. The previous peak was at $107.71 in September 2008. Over the next 19 months, the ADR dropped nearly $11 to $97 in April 2010. Rates slowly have been regaining ground, and in May 2012 the 12-month moving average reached $103.38. If you “do the math,” that is very close to three-fifths of the way back to the original peak in a 24-month time period. If you continue to do the math, we could estimate that based upon the current progress, ADRs would make it back to the prior peak in another 14 or 15 months, or by the end of next summer 2013. (These are not inflation-adjusted numbers.)
So, several important milestones to point out and to keep watching in the future. If you need more detail, let us know.
Steve Hood is senior VP of research for STR. He can be reached at +1 615 824-8664 ext. 3315 or steve@str.com.
