Freitag’s 5: RevPAR on fire in September
 
Freitag’s 5: RevPAR on fire in September
30 OCTOBER 2015 7:43 AM
After August’s slow RevPAR growth, September saw growth return to 8% in the U.S. hotel industry.
HENDERSONVILLE, Tennessee—Hotel results for the United States hotel industry are in, and revenue per available room is back on track after last month’s slow growth thanks to the calendar shift. 
 
Here are five things you need to know about September’s performance data from STR, the parent company of Hotel News Now.
 
1. September RevPAR increased 8%
I should add “as expected.” Further, I should add: “I told you so.” But I won’t.
 
It’s the reverse of the August calendar comp. While the Labor Day shift had negative implications for August, it had a positive effect on the September numbers
 
So, basically the 2.2% RevPAR growth in August and the 8% RevPAR growth in September add to an average over the two months of about 5% growth, certainly a good performance, even though not quite at the level we had seen prior to August.
 
Our forecast for the year still stands at 6.8% RevPAR growth, implying a little bit of a bump in the fourth quarter, which is certainly achievable.
 
RevPAR has been growing for 67 months, and there seems to be no immediate end in sight. RevPAR growth of 8% was of course a function of strong occupancy growth (+3.3%, the third strongest this year) and 4.6% average-daily-rate growth.
 
But again, other than to convince Wall Street traders that the end of industry is not near, I’d not read too much into it. Supply growth this month was 1.2% and will be firmly locked in above 1% from here on out. 
 
2. Room demand increased by 4.6%
This was mostly expected because of the Labor Day shift. The number of rooms sold topped 100 million again (102 million to be exact). It was the fifth month in a row that the industry sold more than 100 million rooms, a record streak. The average monthly number of rooms sold in 2015 is still more than 100 million.
 
In October 2014, the industry sold more than 104 million roomnights. The average increase of new room demand in June, July and September this year was about 4 million new roomnights, so let’s see if that pattern holds in October.
 
3. Chain-scale performance was mixed
Once again the lower-rated scales outperformed the high end.
 
Scale RevPAR % Change
Luxury 5.1
Upper Upscale 3.9
Upscale 6.6
Upper Midscale 8.4
Midscale 9.5
Economy 9.6
Independents 10.8
 
 
Just like for the national numbers, RevPAR growth was driven by ADR. Economy hotels were able to increase room rates 6.3%, whereas upper-upscale hotels increased ADR by 2.4%.
 
One explanation is probably, again, due to Labor Day, drives leisure business. The lower-rated scales traditionally benefit from this.
 
4. Hotel companies are seeing a slowdown in transient
Not to freak anyone out, but some of the third-quarter conference calls mentioned a slowdown in transient demand. 
 
So, let’s look at our weekly segmentation data, for similar patterns:
 
 
Week beginning Transient Occ % Change Group Occ % Change
9/6 +2.5% -31%
9/13 +1.7% -5.2%
9/20 +0.1% +4.5%
9/27 +0.5% +17.1%
10/4 -1.8% +4.6%
10/11 +1.1% +2.7%
 
Looks like occupancy changes from transient travelers are tepid at best.
 
Can we use the continued high occupancy as an excuse (because hotels cannot accommodate more demand)? That might be part of the answer. But it is certainly a bit disconcerting if companies are seeing a slowing in transient demand.
 
Now, also keep in mind that publicly traded companies are always in the business of “perception management” so they tend to overstate the negative sentiment so that they can then outperform what was expected. 
 
I would take this all with a grain of salt, but it’s worth watching. Let’s see what October brings.
 
5. 18 of the top 25 markets reported occupancies of more than 70%
Seven of the top 25 markets had occupancies of more than 80%. San Francisco clocked in at 90.2%. 
 
Atlanta; Houston; New Orleans; Norfolk, Virginia; Orlando, Florida; Phoenix; and Tampa, Florida, all had occupancies of less than 70%.
 
Room-rate increases varied. Four markets registered declines (Chicago -0.1%; Houston -1.3%; New Orleans -2.3%; and Washington, D.C. -1.6%), but those declines were pretty manageable.
 
In Houston, however, demand was down 3.8%. With supply up 2.1%, the limited ADR decline might just be the beginning of the end, so to speak. Philadelphia’s ADR was up 14.4%, thanks to @Pontifex.
 
New York City continues to give investors heartburn, and  ADR was up 1.9% even though demand increased 4.1%. But guess what? Supply is up 2.8%, and that will continue to be the story there.
 
Miami; Nashville, Tennessee; and Seattle all showed 3%-plus supply growth and should certainly affect the numbers from here on out. Well, apparently Nashville hoteliers do not care right now: RevPAR is up 12.5% there.
 
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.

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