LAS VEGAS—The U.S. midscale hotel sector has a lot going for it these days, Jan Freitag, senior VP of global development at STR, said earlier this month during Best Western International’s annual convention.
Strong absolute occupancies are pushing midscale hotels’ performance upward, Freitag said, referencing data from STR, parent company of HotelNewsNow.com.
Year-to-date through August, midscale hotels had an occupancy percentage of 56.7% while upper-midscale properties saw 64.8% occupancy. Average daily rate for the two segments was approximately $75 and $98, respectively, Freitag said, referencing data from STR, parent company of HotelNewsNow.com.
View Freitag’s Best Western presentation.
“You’re selling six out of 10, seven out of 10 rooms every night,” Freitag told the crowd of more than 2,500 Best Western members gathered at The Venetian in Las Vegas.
The supply outlook for midscale hotels also is favorable, Freitag said. The 2.4 million midscale rooms in construction as of August was the second lowest among the chain scales, second only to the economy segment’s 1.3 million rooms.
“Supply growth is really not there … Banks are scared to lend, so we’re not seeing a lot of new construction” across the industry, Freitag said.
He added: “We’re excellent at building into the downturn. Always have, always will.”
Midscale hotels also are seeing sustained growth in revenue per available room, which is now being driven by ADR. The 12-month moving average for the time period stretching from January 2007 to August 2012 shows that upper-midscale hotels have notched a 7.5% RevPAR gain with midscale properties seeing a 6.6% increase.
“STR is saying, ‘Life is good,’” Freitag said. “Actually, life is awesome.”
Future outlook
The 2013 outlook for midscale hotels is not quite as rosy, Freitag said. Projected ADR and RevPAR growth is expected to be below the total U.S. averages.
However, a survey of Best Western members showed a majority in North America are optimistic about 2013 as it relates to their competitive set’s RevPAR performance. A total of 51% of those polled for the Best Western Global Pulse Survey said they expect to perform in line with their comp set while 36% expect to outperform their comp set. Only 12% of those surveyed expect to underperform their comp set.
Compared to the global results of the Best Western survey, 62% expect RevPAR to be in line with their comp set; 28% expect to outperform; and 10% said they would underperform.
As for which region will lead the world out of the global recession, a majority of respondents in North America (62%) said it would be the North American hotel industry. Total results of the survey, however, found that 41% of global respondents said it would be Asia, with North America coming in second at 30%.
