Freitag’s 5: Annualized occupancy at new high
 
Freitag’s 5: Annualized occupancy at new high
29 MAY 2015 6:29 AM
Annualized occupancy was pushed up to 65% in the U.S. during April.
After stellar March performance, the performance numbers for the United States hotel industry in April continued to impress.
 
There were no calendar issues between April 2014 and April 2015. We only traded a Wednesday this year for a Tuesday last year. The Easter calendar shift caused chaos in the weekly numbers, but in the monthly numbers that all washed out.  
 
Here are five things to know about the STR data for the month. (STR is the parent company of Hotel News Now.)
 
1. A new number to report
April had the highest occupancy ever (66.8%) and the highest room demand (99.4 million rooms) ever.  
 
This pushed annualized occupancy (measured as a 12-month moving average) up to 65%. 
 
What does this mean? All key performance indicators (rooms available, rooms sold, revenue, average daily rate, occupancy and revenue per available room) are still at all-time highs.
 
2. RevPAR has been growing for 62 months
Revenue per available room grew 6.4%, which is slower than the average this year. However, keep in mind that we have reported healthy RevPAR growth for April in the last few years:


That said, RevPAR has been growing for 62 months (or for more than five years) straight with no end of growth in sight. 
 
Demand was 3 million rooms higher than last year, and supply was only 1.7 million roomnights higher.  Ultimately that will change and the industry will sell less new rooms than build new rooms, but we do not expect that to happen until 2017.  
 
3. This is the third consecutive month of +0.1% supply growth
Supply growth hit 1.2% during the month. This is finally the acceleration of supply growth that we have been predicting after a slow 2014. Clearly there is momentum in the pipeline and the supply growth:

 

4. NYC had the highest occupancy of any US market
April results for the top 25 markets were pretty healthy (RevPAR +5.7%), but it turns out the rest of the U.S. actually did quite a bit better (RevPAR +7%).  The reason for this was stronger occupancy and rate growth outside the major metros.  
 
ADR in all other markets (+4.8%) outperformed the top 25 markets (+4.1%).  Supply growth for the top 25 markets was 1.3% and stands now year to date at 1.3% as well.  
 
Only three markets of the top 25 had declining RevPAR (Boston -1.7%, Houston -3%, New York City -5.7%). Boston and Houston were driven down by negative occupancy change, which is probably attributable to a major group meeting there last year and not this year.
 
New York City is a whole different story. New York City performance has been a source of constant questioning and head scratching. Riddle me this: April occupancy of 86.9%, literally the highest occupancy of any market in April. Corresponding ADR growth? Well, let’s call that ADR decline: 
-4.6%.
 
On the surface that makes no sense. When I talk to local operators they all agree and nod, and then no one really knows an answer. It is likely a multifaceted reason: more Airbnb units (28,000 or so), bad exchange rate impact, 13,000 rooms under construction and more select-service rooms, which take down the averages.
 
5. Three of the hottest in-construction pipeline markets are in Texas
Is everything bigger in Texas? Maybe so. Developers might think so, as three of the top 10 hottest pipelines for metropolitan statistical areas are in Texas: Houston, Austin and Dallas. Their total rooms under construction adds up to more than 13,000.



The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or its parent company, STR 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. 
 
Clarification: Annualized occupancy is not a new metric reported by STR. The metric is, however, at an all-time high.
 

1 Comment

  • robertkcole May 29, 2015 9:07 AM

    Are the STR data elves running a "same store" analysis on the NYC properties to determine if the core issue is product mix or truely same property ADR decline? Thinking that would eliminate at least a couple theories.

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