BOULDER, Colorado—The revenue-per-available-room recovery is under way and, like others, I’m anxious to see which markets will lead the U.S. out of the trenches. Will it be the markets that fell the least, or the markets that showed the earliest signs of recovery? Rather than speculating, I thought I’d investigate.
I believe an appropriate benchmark to measure the RevPAR recovery is a how quickly each major U.S. market can meet or exceed its previous cycle’s RevPAR peak. Granted, it might take quite some time to achieve that growth, but we will all celebrate when we get there! For that reason, I’ll be documenting the recovery process over the next several months/quarters to see which markets are the first to re-establish their respective RevPAR levels and conversely, which markets continue to experience turbulent recoveries.
The following table (sorted alphabetically) gives the market name, trailing 12-month (TTM) moving average RevPAR peak and trough and the respective dates of these high and low points. Using the TTM time period helps normalize the data and substantiates a 12-month sustainable growth rather than a unique monthly/ seasonal irregularity.
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As seen in the previous table, some markets experienced their RevPAR peak as early as mid-2007 (Tampa, St. Louis) while other markets didn’t peak until early-2009 (Washington, D.C.). The table also introduces some of the hardest hit markets, like Detroit, who in the 24 months between January 2008 (peak) and January 2010 (trough) dropped RevPAR by 38.8 percent. Phoenix dropped 33.4 percent in RevPAR between February 2008 and February 2010, which is likely attributable to the significant oversupply in the market. On the more positive side, the table shows markets which were more resilient to the recession; Washington, DC-MD-VA between January 2009 and February 2010 only dropped 13.2 percent, likely a combination of the inauguration and minimal supply growth.
Each market’s respective RevPAR peak is used as the benchmark for their respective recovery; each month I’ll use the current month’s (in this case April 2010) TTM RevPAR versus the peak displayed in the previous table.
The table below details the results of the U.S. RevPAR recovery for April 2010. The table, sorted in descending order, highlights the remaining recovery that each respective market must obtain to reach its pre-recessionary peak. In other words, the lower the percentage the better that market’s result.
Current U.S. Top 26 Markets RevPAR Recovery Leader: NEW ORLEANS, Louisiana
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The April RevPAR recovery leader is New Orleans, with only 10.3-percent growth needed to reach its September 2008 RevPAR peak. Not to take away from this accomplishment, but it should be noted that New Orleans represents an anomaly in recent historical data compared to other U.S. markets. Unlike most other markets, New Orleans didn’t experience the typical RevPAR growth and subsequent cycle peak primarily because it was still in the recovery phase as a result of Hurricane Katrina, and was still at comparatively low performance levels. So while New Orleans is at the top of my list it does benchmark off of a slightly lower mark than the other markets.
Close behind New Orleans is Washington, DC-MD-VA with only 12.1 percent recovery remaining. The early laggards include Phoenix (32.6 percent), Chicago (28.7 percent) and Houston (28.5 percent). Keep in mind, the severity of each market decline will play a significant role in their ability to recover. For example, Detroit, which previously mentioned fell an unprecedented 38.8 percent (equivalent to US$19.32), has a long way to grow. Nevertheless, I must commend Detroit because even after having fallen the farthest in absolute dollars, they’ve also gained the most back; having already gained back US$7.00 in RevPAR since January of 2010, keeping them out of the bottom three markets with 24.8 percent recovery remaining. Overall, taking an average of the U.S. Top 26 major markets we have 21.2 percent recovery remaining.
Please feel free to post your predictions for the first market to make a full recovery and when and stay tuned for my monthly articles to watch your markets.