US hotel industry: Good and getting better
 
US hotel industry: Good and getting better
06 AUGUST 2015 6:29 AM

Record-setting U.S. hotel performance, coupled with strong economic trends, has led to “a veritable party for this industry.”

NASHVILLE, Tennessee—It’s one thing to talk about optimism, it’s another thing to have data to back it up. Presenters during Day One of the Hotel Data Conference in Nashville used performance and economic data to support a sunny view of industry health now and into the near future.
 
“The last five years have been a veritable party for this industry,” said Adam Sacks, president of Tourism Economics, during a general session titled “Setting the stage: A complete overview.”
 
Sacks said the recovery of the U.S. economy has gone hand in hand with the hotel industry recovery. What makes this period so extraordinary, he said, is just how broad-based that economic recovery has been.
 
“Industries that suffered most during the downturn have recovered,” he said. What that ultimately means is that “consumer spending over the last three years on lodging has increased 25%, while spending on other goods and services has increased 12%.”
 
With hotels gaining an ever-increasing share of consumer spending, Sacks said it makes sense that gross domestic product and room demand have moved historically in step. But what has made the past few years really stand out have been those off-the-charts demand numbers, which now outpace GDP growth.

STR, parent company to HNN, predicts 2015 year-end demand percent change to be 2.9% growth over last year, according to its update forecast. PKF Hospitality Research forecasts demand closing the year at 3.4% higher than 2014.

The U.S. has even more positives in its corner, Sacks said, thanks to its role in global GDP growth. The U.S. performance is accelerating, while powerhouses such as China are slowing.
 
“The U.S. is showing real signs of strength,” he said. “Even with the world crumbling down around us, the U.S. is not giving up, the economy is holding its own, and we believe it’ll be driving global growth for the year.”
 
In addition to the gathering force of consumer spending, Sacks said other contributing factors are improving labor market conditions and wage growth.
 
To put U.S. economic growth in perspective, Sacks described it like this: “We expect things to accelerate through the second half of this year. Consumer spending is driving, in the front seat. Housing is in the back seat. Investment is in the trunk, and trade is being pulled behind everything in a trailer.”

Industry records
Stephen Hennis, director of STR Analytics, sister company of HHN, shared the overall industry perspective, echoing Sacks’ optimism.

“Trends are going uphill in every key metric,” he said. “We’re at record levels of every metric and continuing to grow.”
 
In the U.S., June saw the highest occupancy levels ever (73.1%), the highest room demand ever (109 million rooms) and the highest annualized occupancy (65.2%), all according to STR.

Breaking those numbers down, Hennis looked in particular at group and transient demand levels.
 
“Compared to the prior peak, transient is well ahead, yet group demand just got back to prior peak levels last October and it’s still growing. So maybe group demand isn’t as far behind as we think,” he said.
 
Looking at demand broken down by markets, he pointed out that 49 of the submarkets STR tracks in the U.S. are at record high occupancies right now, despite supply added to the inventory over the past several cycles.
 
Supply remains negligible, he said, since “we’re still so far below where we were at the prior peak of the cycle.”
 
On the average-daily-rate side, Hennis said inflation-adjusted ADR is still behind pace compared to growth coming out of the past cycle. However, he said that “now more than 82% of properties in the U.S. are seeing ADR increases. That’s pretty comparable to what we saw in the middle of the last cycle, around 2005 to 2007.”
 
Moreover, he said now 44% of U.S. hotels are increasing their rates by more than 5%.
 
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