Group versus transient ADR trends

HENDERSONVILLE, Tennessee—Of the trends that emerge when STR compiles data from nearly 3,000 U.S. properties as well as additional hotels in Canada, Mexico, the Caribbean and the United Arab Emirates, one of the most interesting is the group and transient average daily rate percent change.

Steve Hood, Senior vice president of IT, STR

At the end of October 2008, the group ADR percent change for the total U.S. was 4 and the transient ADR percent change was 1.2, a more significant difference of 2.8 percent. It’s not too surprising that transient rate growth is falling off faster than group rate growth. The total 2008 ADR rate growth is being substantially supported by group business.

The difference for luxury hotels in 2008 was 2.3 percent. The luxury group ADR percent change was 3 percent, and the transient ADR percent change was only 0.7 percent. The difference for upper-upscale hotels in 2008 was even more, at 3.2 percent. The upper-upscale group ADR percent change was 4 percent, and the transient ADR change was only 0.8 percent.

In 2007, transient ADR growth was greater than the group ADR growth in six of the nine U.S. regions, but in October 2008, we see an almost total reversal. The group ADR growth was greater than transient ADR growth in eight of the nine regions, with the exception of New England.

We see a similar trend in the top 25 markets. In 2007, there were 15 markets in which the group rate growth was faster than the transient rate growth and 10 markets where the transient rate growth was faster than the group rate growth. Also in 2007, the average rate growth for all 25 top markets was the same: 6.2 percent for both group and transient.

In 2008, there were 21 markets in which the group rate growth was faster than the transient rate growth and only four markets where the transient rate growth was faster than the group rate growth. These four markets were Boston; Miami; Norfolk-Virginia Beach, Virginia; and Orlando. In 2008, the average rate growth for all 25 top markets was 4.3 percent for group and 1.6 percent for transient, a difference of 2.7.

There is also no surprise to see a major change when it comes to urban and airport location hotels. In 2007, the group ADR percent change for urban hotels was 7.1 percent, and the transient ADR percent change was 8.1 percent. The group ADR percent change for airport hotels was 5.8 percent, and the transient ADR percent change was 6 percent, a difference of just 0.2 percent.

In 2008, though, we see a much wider spread. The group ADR percent change for urban hotels was 6.2 percent, and the transient ADR percent change was 3.5 percent, a difference of 2.7 percent. The group ADR percent change for airport hotels was 6.1 percent, and the transient ADR percent change was 1.5 percent, a difference of a 4.6 percent.

When looking at locations, it is also stands out that the group ADR percent change for urban hotels has only dropped between 2007 and 2008 from 7.1 percent to 6.2 percent—not even one point. Even more impressive is that the group ADR percent change for airport hotels has actually increased between 2007 and 2008, from 5.8 percent to 6.1 percent respectively.

It will be very interesting to watch these trends as we finish out 2008 and start 2009. One would expect the differences between group and transient ADR percent changes to continue and possibly widen for a time. At some point in 2009, we expect to see the differences crest and begin to fall off. Stay tuned for more information, and contact STR to find out more about the segmentation hotel reviews.