HENDERSONVILLE, Tennessee—For the next installment of my analysis on the best performing market of 2011, I have decided to focus on adjusting demand for population.
Read “How cost of living impacts market performance.”
Essentially, I am interested in seeing how many roomnights are sold per capita as a way of evening the demand playing field. I also chose to adjust revenue to take the analysis closer to addressing best performance (because the goal is revenues) and because room revenue per capita is also an interesting metric that is not usually calculated. This analysis covers 91 major U.S. markets and uses population by Metropolitan Statistical Area acquired from the U.S. Census Bureau.
The adjustments here are performed by dividing the total demand for the market by the population in millions, yielding roomnights sold per million people. To reach roomnights sold per capita, one would simply divide by 1 million.
Before performing the adjustments, I knew the data would favor unique tourist destinations with a lot of hotels and few native residents. What I did not fully consider was the great degree to which population can vary, giving a severe advantage to smaller markets as you can see from the demand adjustments below (smaller markets highlighted):
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All the major markets with the largest populations have been removed from the top 10. Several secondary markets with populations less than a million have had their demand increased by the adjustment. The most notable top 10 arrival is the Maui Island, Hawaii, market at No. 1 with almost 25 roomnights sold per resident in 2011. Another secondary market with a very high demand per capita figure is Myrtle Beach, South Carolina, which ranked third. Las Vegas and Orlando, Florida, are the only larger markets that were able to remain in the top five with populations of approximately 2 million.
Now to take a look at the revenue adjustments performed the same way:
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The revenue results do not differ drastically from the demand results. It is worth mentioning Washington D.C’s high rates keep it from sliding out of the top 10 here. Myrtle Beach; Oahu, Hawaii; New Orleans; and Charleston, South Carolina, all managed to increase their position compared to the adjusted demand rankings. Meanwhile Las Vegas; Orlando; Savannah, Georgia; and Knoxville, Tennessee, fell in comparison to the previous adjusted rankings. These changes speak to the relative rate levels of the markets shown.
Is this an accurate determinant of the best performing markets? Maybe not because it clearly gives an advantage to small tourist markets many people might not find desirable in which to live permanently for whatever reason. However, it is still an interesting perspective to look at what destinations are selling the most hotel rooms based on their existing workforce and infrastructure. Population is obviously not a perfect way to adjust for these factors, but I believe it can provide a good estimate for this purpose. So while larger markets obviously will sell more roomnights, this adjustment provides a proxy for how many rooms a market sells based on its resources and in this way is an indicator of the best performing market.
Just for fun at the end here I would like to show the bottom 10 rankings for demand and revenue. For the major markets that appear in the adjusted lowest 10, this analysis might suggest the market is either at a natural disadvantage or there is room to grow the supply/rates.
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