HENDERSONVILLE, Tennessee—As the economic recession eases and travelers return to the road, let’s take a look at the performance of the 25 largest hotel markets (excluding Las Vegas) to see how much or how little these markets have recovered.
To understand the movements of average daily rate and demand in the latest down- and upturn, we observed the time frame starting in January 2008. We established the months with the highest and the lowest occupancy between January 2008 and March 2010 (on a 12-month moving-average basis). We then reported the demand change that took place between the highest occupancy month and March 2010, and established the average daily rate change for the same time period.
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As chart 1 shows, there are only three markets (Washington, D.C., New York City and Miami) with higher annualized demand today than they had at the peak occupancy month. This may sound counterintuitive until you remember those markets have also seen unprecedented new supply growth. So, while the absolute occupancy today may be lower than it was at the peak, the room demand is now at peak levels. However, for the other 22 markets, annualized room demand is still well below former highs, and in the instance of Houston, Detroit, Atlanta and Nashville, Tennessee, more than 10-percent lower. Room rate growth, when compared to the peak occupancy month, has been absent from all the observed markets.
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When comparing the latest demand and rate performance to the lowest occupancy month since 2008, a somewhat more encouraging picture emerges. Chart 2 shows room demand has increased for almost all cities, on average around 2.4 percent. New York saw demand surge from the trough with more than 6 percent. Miami was another success story where demand increased 4.8 percent, and Miami holds the distinction of being the only market where hoteliers were able to increase ADRs, if only by 1.9 percent.
We will continue to monitor the performance of the larger markets and hope to report ADR increases, together with demand increase, in the next few months.
