The January 2011 performance numbers were released 17 February. These numbers, especially the average daily rate metrics, carried a special significance: It was the first month the running 12-month ADR percent change number was positive since March 2009. That means there were 21 months of negative running 12-month ADR numbers.
Compare the ADR metrics to the occupancy metrics and we find there were 42 (twice as many) months of negative occupancy numbers, which started way back in January 2007 before going positive during July 2010. The occupancy metrics went negative over two years prior to the ADR metrics, and the occupancy metrics returned to positive territory a little more than a half a year prior to the ADR metrics.
Check the graph and you will see the occupancy numbers softened and rebounded slightly in 2007, then dipped dramatically in 2008—a repeat of the trend from the early ‘90s. The ADR percent change numbers had an advantage because they started at a much higher level. They started going down at the beginning of 2007, but it took more than two years to make it to negative territory. Notice the occupancy percent change peaked at 3.4% during February 2005, while the ADR percent change peaked at 7.5% (more than twice as high) during October 2006 (more than a year and a half later).
Now let’s switch from the running 12-month percent change numbers to the actual monthly percent changes to drill down into these trends. If you look at the occupancy graph, you start seeing negative months beginning during July 2006. There were, however, four positive months during 2007. All months were negative during 2008 and 2009, including seven double-digit numbers near the first half of 2009. Then when you look at 2010, all but one of the months was positive, but also note these were strong numbers, most in the range from 6% to 7% gains.
When you look at the monthly percent change numbers for ADR, you see some significant differences. There are strong positive numbers during 2006, 2007 and most of 2008. The last two months of 2008 were negative as well as all of 2009, including nine months that went lower than -8%. The first four months of 2010 were negative, including January at -7.1% and February at -4.5%. The remaining months of 2010 were positive, but only one month exceeded 2% (+2.6% in November). This certainly helps to explain why the running 12-month ADR numbers just made it to positive territory.
Hopefully, we will see a more convincing trend in the ADR numbers during 2011. The ADR percent changes for the last four weeks have all been in the 3% range, so that is a little better. Only time will tell.