The current downturn has affected chain-scale segments across the board, but some more than others. Historically, the midscale-without-food-and-beverage segment has been one that tends to perform a bit better then the rest regardless of the economic conditions. This is true during the current downturn, and it appears location also plays an instrumental role in their performance.
The STR-defined six location types are urban, suburban, airport, interstate, resort and small metro/town. Within these six location types, STR samples between 95 to 99 percent of the midscale without F&B room supply.
Year-to-date ending May, the midscale-without-F&B room supply increased 7 percent, room demand declined 5.8 percent, and room revenue decreased 9.6 percent during last year. Although room demand and revenue have declined, this segment is faring better than the other chain scales.
Analyzing the midscale-without-F&B segment based on location, it was surprising to see only one of the six location types is experiencing flat/positive room demand and room revenue growth. The small metro/town location hotels in the segment experienced 0.1 percent growth of room demand and revenue during the first five months of 2009 compared with the same period last year.
Small metro/town locations are typically considered smaller secondary or tertiary markets and include cities such as Asheville, North Carolina, and Gulfport, Mississippi. One would assume that these gains are most likely driven by weekend business, when it is actually the weekdays that have experienced the positive growth in rate over last year: 0.2 percent.
Four of the six locations have experienced double-digit, room-revenue declines. Midscale without F&B properties in airport and resort locations experienced the greatest decline year to date ending May. Room revenue for midscale without F&B hotels in airport locations declined more than 16 percent throughout last year, and room demand decreased 8.2 percent. It’s apparent the cutbacks in airline capacity and routes have negatively affected this segment.
Room revenue declines for midscale without F&B properties located in resort locations are credited to the poor performing weekdays. Year to date ending May, weekday revenue per available room was down over 21 percent.
As of May, the midscale without F&B segment had almost 53,000 new rooms in construction. The two locations experiencing the largest supply growth in this segment are small metro/town and interstate. Small metro/town midscale without F&B room supply increased 11 percent and interstate room supply increased more than 10 percent. As the economy recovers, it’ll be interesting to see how the large supply growth affects the midscale without F&B properties among these two location types.
We’ve all heard and have probably used the phrase “location, location, location” regarding real estate—commercial or private. The data concerning the midscale-without-F&B segment shows this age-old saying holds true.