Thanks to Bob Hunter with Hunter Realty on this idea. Bob writes, "How about number of closed hotels … perhaps broken down by age, chain scale, and geography?"
Great idea. STR does in fact keep a list of all the properties that have closed over the decades, though the list grows more accurate from about 1985 onwards.
We were able to compile data on more than 6,500 closed properties. The basic stats are these:
- 6,532 hotels from all 50 states
- 544,656 rooms
- average room count: 84
- more than 45 brands represented as of the date of closing
- average life span: 34 years
Digging into the numbers a bit more reveals some interesting tidbits:
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As you might expect, most of the closures represented Independents, with Economy properties a distant second. Very few closures are from the high end of the spectrum.
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This one is a bit surprising. Nearly 13 percent of all the closures were for properties 10-years-old or younger. Clearly some properties were victims of natural disasters (Hurricane Katrina, etc.) but that's still a pretty big number. For the properties that closed when they were 10-years-old or younger, most of the closures occurred during 2004 and 2005.
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Geographically speaking, the largest amount of closures occurred in the Southeast (speaking of Katrina and hurricanes ...). Lots of mold down that way, too, which could be the culprit for some of the properties that closed.
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Most closures happened in suburban or small metro locations. In terms of property size and price tier, most of the closures represented small (20-50-room) budget properties. Then consider these properties were largely independents, and you can see we're talking about a lot of "mom and pop" operations. One could surmise that a lot of these were single-ownership family ventures, where perhaps the owners decided to sell (or were foreclosed upon), and the property was worth more as an adaptive reuse rather than as a going concern.
Here's another surprising one:
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The largest amount of closed hotels only ever had one brand name (or remained independent) during their life cycle. Several had two, but beyond that the numbers dwindle. (It would be interesting to know the stories behind the handful of hotels that went through seven names). We would have guessed that two names would have been the majority of the cases, thinking that if one brand wasn't working, a property owner would have tried another brand or switched to independent. But that assumption is predicated on a second assumption that a closed property means it failed, which certainly doesn't have to be the case. Many properties that close still make debt services, but if the land is worth more with another use on it, market forces will push for an adaptive reuse.
Finally, we looked at when these properties closed. We focused on the period from 1985 to the present, as this represents over 90 percent of the closures.
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There’s a big spike during 2005, as you can see. Again, it's easy to blame Katrina here, but only a quarter of the properties that closed that year were located in the South Atlantic region. And the number of closures had been steadily creeping up before that point, anyway. If you take a look at (seasonally-adjusted) RevPAR from 2000 to 2005, it was almost unchanged. Yet if you financed your property in 2000, you were paying a relatively steep interest rate. With cheaper money available during 2005, a mom-and-pop hotel owner was just as likely to sell a struggling property to a speculator rather than refinance and pray for the best. The trend of closures here follows roughly the same pattern of hotel sales in general, with the peak also occurring during 2005 and then declining sharply after 2007. So, assuming that a portion of all hotel sales end up as adaptive reuse projects, the trend line above can be explained as a simple correlation.
Any factoids you want to know about? E-mail me at cwilson@STRanalytics.com and let me know.
