Extended-stay hotel RevPAR to exceed 2007 peak
 
Extended-stay hotel RevPAR to exceed 2007 peak
26 SEPTEMBER 2012 8:08 AM

The Highland Group projects extended-stay hotels will finish the year with a RevPAR increase of 7% despite flat occupancy growth.

Mark Skinner

ATLANTA—Extended-stay hotel revenue-per-available-room trends have been very similar to the overall hotel industry for more than a decade. This year is no exception, but the components of RevPAR growth show some differences.

During the first two quarters of 2012, extended-stay hotel supply and demand growth rates were essentially the same. Excluding a slight decline during the second quarter of 2012, extended-stay occupancy was flat for the first half of the year and all the RevPAR growth came from increasing average daily rate.

Click to enlarge

Extended-stay hotel average daily rate grew 7.2% in each of the first two quarters in 2012. This is considerably faster than the 4.4% gain the overall hotel industry reported for the first half of the year. Because of extended-stay’s strong price-value position, ADR growth much above the overall hotel industry is not sustainable in the long run. This is similar to 2006 when extended-stay ADR well outpaced the industry for the second consecutive year but segment occupancy declined and extended-stay hotel RevPAR growth was only slightly ahead of the overall hotel industry. The following year extended-stay and industry ADR increases were approximately equal. Respective RevPAR increases were also very close.

STR’s most recent forecast predicts overall hotel ADR will increase 4.4% in 2012 compared to 2011. Therefore, ADR growth is expected to be the same in the second half of the year as it was in the first. However, STR forecasts overall hotel occupancy, which is up 3.4% in the first half of 2012, will finish the year up 2.1%. Accordingly, occupancy gains during the second half of the year are expected to fall below 1%. STR is the parent company of HotelNewsNow.com. www.str.com

If STR’s forecasts are realized, the overall hotel RevPAR growth rate will decline in the second half of 2012 and RevPAR will be up 6.5% for the year compared to 2011.

Extended-stay hotel’s slight occupancy decline in 2012 is partly because of a very large number of rooms under renovation. As these rooms become sellable again, occupancy should rise. We expect extended-stay occupancy to be flat or show slight improvement for the 2012 year compared to 2011.

Continued increases in ADR are forecast to drive RevPAR growth, which should be faster than the overall hotel industry if actual performance metrics are close to the most current forecasts from STR and The Highland Group.

Click to enlarge

Emerging from the most recent downtown, extended-stay hotels took approximately 19 quarters to return nominal RevPAR to the peak set in 2000. Extended-stay nominal RevPAR should return to the peaks achieved in 2007 during 2012. That would be about the same time it took during the previous recovery.

The table following summarizes recent history and our forecast for 2012.

Mark Skinner is a principal with Atlanta-based Highland Group. He can be reached at mskinner@highland-group.net.

The opinions expressed in this column do not necessarily reflect the opinions of HotelNewsNow.com or its parent company, Smith Travel Research and its affiliated companies. Columnists published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.

No Comments

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.